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How do you understand our system of government functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Emergence of Offshore Courts

Nowadays, overseas companies, along with the wealthy individuals behind them, can sue nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted in secret. In contrast to domestic courts, these panels grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to businesses based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, even billions.

This compensation are based not on tangible damages but funds the panel members conclude the company would perhaps have made. The government might be compelled to rescind the measure. It becomes hesitant to passing future laws in that area, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms learn from each other, and hedge funds finance suits for a share of a share of the awards. The result? Sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices made by parliaments is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of profound opacity – into trade treaties.

A Specific Case: The Whitehaven Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer found that plans to open 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 questionable argument that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to exclusively the corporations bringing the case.

In August, a firm whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was established to hear it.

This firm is suing the UK for the profits it would have generated if the mine had received permission to commence operations. We have no idea how much this could amount to. What legal team is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he may employ the tribunal to contest the restrictions the UK imposed on him following the invasion of Ukraine. He has already started suing a small nation on these grounds, demanding a colossal sum: half that government’s yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these scenarios could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this topic described critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That warning has now materialised. Recently, oil and gas and resource corporations have initiated a record number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to prevent global warming. Firms have to date won $114bn through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP