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How do you understand our political system functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Courts

Nowadays, international firms, or the billionaires behind them, have the power to sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases take place in secret. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies based in this country. Access is granted only to corporations operating from foreign soil.

If a tribunal finds that a legislative action might diminish the corporation’s expected profits, it may order compensation of vast sums, running into billions.

These sums constitute not tangible damages but funds the tribunal officials conclude the company could potentially have made. The government may have to rescind the measure. It will be deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as firms observe each other, and private equity finance suits for a share of a portion of the awards. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices taken by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of profound opacity – into international trade agreements.

A Concrete Case: The UK Coal Mine

Last year, activists won a great victory at the senior court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government later cancelled the permission the previous administration had approved. Currently, this legal outcome faces being overturned by an foreign court answering to only the companies petitioning it.

During August, a firm whose final controllers reside in the tax haven lodged a claim against the UK government. The previous week a tribunal in Washington DC was established to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Who is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a international entity contests it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case at present, but it is highly possible that he may employ the ISDS mechanism to fight the sanctions the UK enacted against him after the Russian aggression. He has previously filed a claim against another European state on these grounds, seeking $16bn: half that nation's annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these events wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by general mockery.

That threat has come to pass. This year, energy and mining firms have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the UK mine – official measures to halt climate breakdown. Companies have so far won $114bn through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP