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What is your understand our political system works? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that was how it once functioned. No longer.

The Advent of Offshore Courts

In the modern era, international firms, along with the wealthy individuals behind them, can sue nation states for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, just as our government, including businesses headquartered in this country. They are open only to entities registered abroad.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but compensation the arbitrators decide the company would perhaps have made. The government may have to abandon its policy. It becomes hesitant to introducing similar legislation in that area, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The consequence? National sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings taken by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, activists secured a significant win at the high court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the consent the Tories had issued. Now, this success is under threat by an foreign court accountable to only the entities filing the suit.

Last August, a firm whose ultimate owners are located in the tax haven initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has no idea how much this might be. Who is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has started suing Luxembourg on these grounds, seeking $16bn: half that government’s annual revenue. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that these events were not possible. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this matter accused activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That threat is now a reality. Recently, oil and gas and resource corporations have initiated a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have to date won vast sums by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP