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How do you understand our political system works? Perhaps similar to this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, and the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted in secret. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, including companies operating from this country. The door is open solely for entities registered abroad.

Should an arbitration panel rules that a government measure could harm the corporation’s projected profits, it can award damages of vast sums, running into billions.

This compensation constitute not actual losses but funds the arbitrators conclude the company would perhaps have made. The state may have to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as companies observe each other, and hedge funds bankroll lawsuits in return for a share of the awards. The result? Sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices made by elected bodies is that this clause has been written – without public consent, and typically amid a climate of profound opacity – inside trade treaties.

A Real-World Instance: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that plans to open the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The incoming administration subsequently revoked the licence the Tories had granted. Now, this victory faces being overturned by an foreign court accountable to exclusively the companies petitioning it.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has no idea how much this could amount to. What legal team is representing it challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a foreign company challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the tribunal to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Among the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these events could not occur. Years ago, a senior politician, championing the largest and riskiest of all these agreements, stated: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Warnings that “as corporations start to realise the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of claims against nations rich and poor, opposing – similar to the UK mine – state efforts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP