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What is your reckon our political system operates? Perhaps similar to this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that used to be how it operated in the past. Those days are over.

The Emergence of Offshore Courts

In the modern era, overseas companies, and the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to businesses based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions, running into billions.

These awards represent not tangible damages but funds the tribunal officials decide the company could potentially have made. The administration could be forced to drop the legislation. It is hesitant to passing future laws in that area, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations observe each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? Democratic sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the consent the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities filing the suit.

During August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. We have no idea how much this could amount to. Which individual is acting on its behalf against the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it appears probable that he’ll use the tribunal to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously filed a claim against a small nation on these grounds, claiming $16bn: half that nation's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

We were assured that such things wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That prediction is now a reality. This year, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP