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What is your perceive our system of government works? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Advent of Offshore Courts

Nowadays, international firms, and the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies grant no right of appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. The door is open exclusively to entities based overseas.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums are based not on tangible damages but money the panel members determine the company might otherwise have made. The state may have to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of cases are being filed, as firms take cues from each other, and investment funds finance suits for a share of a cut of the takings. The result? Sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the licence the previous administration had issued. Currently, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations petitioning it.

During August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the United States was set up to consider the case.

The company is suing the UK for the money it might have made if the mine had been allowed to proceed. We have no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The government passes a law, the domestic court validates it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK levied against him following the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, claiming $16bn: an amount representing half state's annual revenue. Among the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these scenarios wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this issue described campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations grasp the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That warning has now materialised. In the current period, energy and extraction companies have initiated a record number of claims against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to halt global warming. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP