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What is your perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Not anymore.

The Advent of Offshore Courts

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies headquartered in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but funds the panel members conclude the company might otherwise have made. The state may have to rescind the measure. It becomes hesitant to enacting future policies along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and hedge funds finance suits in return for a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions taken by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, activists won a great victory at the senior court. The justice determined that proposals to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the licence the previous administration had granted. Today, this success is under threat by an foreign court reporting to no one but the companies bringing the case.

Last August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. Which individual is representing it against the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case so far, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him after the war in Ukraine. He has previously filed a claim against a small nation with similar intent, demanding $16bn: half that nation's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Costs

Politicians promised that these scenarios could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter described critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations grasp the authority they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. In the current period, oil and gas and extraction companies have filed a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP