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What is your reckon our political system operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. Well, that was how it operated in the past. No longer.

The Rise of Offshore Courts

In the modern era, international firms, and the billionaires who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to entities operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These awards constitute not tangible damages but compensation the arbitrators determine the company would perhaps have made. The government might be compelled to rescind the measure. It is deterred from passing future laws along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations take cues from each other, and private equity finance suits for a share of a cut of the takings. The result? Democratic sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings taken by legislatures is that this stipulation has been inserted – without democratic mandate, and often in a climate of extreme secrecy – inside international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the senior court. The presiding officer determined that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had accepted the questionable argument that the mine could have no impact on climate commitments. The incoming administration subsequently revoked the consent the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies bringing the case.

In August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was convened to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. What legal team is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against another European state on these grounds, seeking $16bn: half that state's yearly income. Among the counsel representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen state funds as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that such things could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this topic described campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have initiated a historic level of suits against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt global warming. Companies have thus far won $114bn via ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP