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What is your understand our system of government works? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Courts

Nowadays, foreign corporations, and the oligarchs that control them, can sue nation states for the policies they pass, at private courts composed of commercial attorneys. These proceedings are held in secret. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The state could be forced to drop the legislation. It is discouraged from enacting future policies in that area, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and hedge funds fund legal actions for a share of a portion of the takings. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Real-World Example: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this victory is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The company is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. We have little idea how much this might be. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against another European state for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An expert on this issue labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That prediction has come to pass. In the current period, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – similar to the UK mine – official measures to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP