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How do you perceive our political system functions? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Offshore Courts

Today, overseas companies, along with the billionaires that control them, are able to litigate against nation states for the regulations they pass, at offshore tribunals staffed by business advocates. The cases take place away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including businesses headquartered in this country. They are open exclusively to businesses based overseas.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, potentially billions.

These awards represent not actual losses but money the panel members conclude the company could potentially have made. The government might be compelled to rescind the measure. It will be hesitant to passing future laws along the same lines, worried about facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices made by elected bodies is that this provision has been written – absent public approval, and frequently under a climate of profound opacity – inside international trade agreements.

A Real-World Case: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the High Court. The presiding officer found that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration then withdrew the licence the previous administration had issued. Today, this legal outcome is under threat by an offshore tribunal accountable to exclusively the companies filing the suit.

In August, a corporate entity whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was established to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the high court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that these events could not occur. Years ago, a former prime minister, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with general mockery.

That warning has now materialised. Recently, oil and gas and resource corporations have lodged a historic level of suits against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP