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How do you reckon our political system works? It could be along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. However, that was how it once functioned. Those days are over.

The Rise of Offshore Courts

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue governments for the policies they pass, at private courts composed of corporate lawyers. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. The door is open only to businesses based overseas.

When a secret court finds that a government measure might diminish the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on actual losses but money the panel members decide the company could potentially have made. The state could be forced to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions made by legislatures is that this stipulation has been written – absent public approval, and typically amid conditions of total confidentiality – within trade treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the high court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The new government subsequently revoked the consent the former government had granted. Today, this victory faces being overturned by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a firm whose final controllers are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was set up to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. We have little idea how much this could amount to. Which individual is representing it challenging the state? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The state passes a law, the national judiciary supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it appears probable that he’ll use the tribunal to contest the restrictions the UK enacted against him following the Russian aggression. He has already started suing a small nation for this reason, claiming a colossal sum: half that government’s yearly budget. Among the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Risks

We were assured that these scenarios could not occur. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. In the current period, energy and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP