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Can you perceive our political system works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. However, that was how it used to work. Those days are over.

The Advent of Offshore Courts

Today, foreign corporations, or the billionaires behind them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of commercial attorneys. The cases are held behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises operating from this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The state could be forced to drop the legislation. It is discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a portion of the awards. The consequence? Sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings taken by legislatures is that this provision has been written – without public consent, and typically amid an atmosphere of profound opacity – into international trade agreements.

A Specific Instance: The UK Coal Mine

A year ago, a conservation group won a great victory at the high court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel reporting to only the entities bringing the case.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Last week a tribunal in the US capital was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. The public has little idea how much this could amount to. Who is representing it challenging the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he’ll use the tribunal to fight the restrictions the UK enacted against him after the Russian aggression. He has already started suing a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Among the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in leveraging immobilised state funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An adviser on this issue labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That warning has now materialised. In the current period, oil and gas and mining firms have filed a unprecedented number of claims against nations rich and poor, opposing – similar to the Whitehaven project – official measures to halt global warming. Firms have thus far won $114bn through ISDS, of which energy giants have secured $84bn. That represents the combined GDP