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Can you perceive our system of government works? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Well, that was how it used to work. No longer.

The Advent of Offshore Courts

In the modern era, international firms, along with the billionaires that control them, are able to litigate against governments for the laws they pass, at private courts staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. The door is open solely for businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These awards represent not actual losses but funds the panel members decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being filed, as firms learn from each other, and investment funds finance suits in return for a share of the awards. The consequence? National sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the choices made by legislatures is that this stipulation has been incorporated – without public consent, and often in an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the senior court. The presiding officer determined that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The new government then withdrew the permission the former government had approved. Currently, this success could be compromised by an offshore tribunal reporting to no one but the companies bringing the case.

In August, a company whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The company is suing the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is serving as its counsel against the state? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he may employ the tribunal to contest the sanctions the UK levied against him following the Russian aggression. He has started suing a small nation for this reason, claiming sixteen billion dollars: half that nation's yearly budget. Among the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “We’ve signed trade deal upon trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies grasp the influence they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has come to pass. In the current period, energy and resource corporations have lodged a record number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have so far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP