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What is your perceive our political system operates? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, international firms, along with the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place in secret. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, including businesses operating from this country. The door is open exclusively to businesses based overseas.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

This compensation constitute not real financial harm but money the arbitrators decide the company might otherwise have made. The administration could be forced to drop the legislation. It is deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as firms take cues from each other, and hedge funds fund legal actions for a share of a cut of the awards. The consequence? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under a climate of extreme secrecy – within international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The new government then withdrew the licence the Tories had issued. Today, this victory is under threat by an offshore tribunal reporting to no one but the companies bringing the case.

In August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging 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 could have earned if the mine had received permission to proceed. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a international entity challenges it through an secretive private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, claiming $16bn: an amount representing half state's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

Politicians promised that these scenarios could not occur. In 2014, a government leader, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this topic described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and resource corporations have lodged a historic level of suits against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to stop environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP