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Can you understand our political system functions? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, along with the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, including enterprises based in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation represent not real financial harm but funds the tribunal officials conclude the company could potentially have made. The government might be compelled to drop the legislation. It will be discouraged from introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies observe each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices taken by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the senior court. The justice ruled that plans to dig the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government subsequently revoked the consent the former government had granted. Today, this victory is under threat by an secret arbitration panel reporting to only the corporations bringing the case.

Last August, a company whose final controllers reside in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in the United States was established to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has no clear indication how much this could amount to. Which individual is acting on its behalf against the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. 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 represents its behalf.

A Sanctions Case

Concurrently that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, claiming a colossal sum: equivalent to half of state's yearly income. Part of the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that such things wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That warning has now materialised. In the current period, oil and gas and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Firms have thus far won $114bn via ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP