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What is your reckon our system of government works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Advent of Offshore Courts

Today, foreign corporations, and the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these tribunals grant no right of appeal or legal review. You or I are barred from bringing a case to them, nor can our government, including companies headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums represent not real financial harm but compensation the tribunal officials decide the company could potentially have made. The administration could be forced to abandon its policy. It will be hesitant to passing future laws of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of extreme secrecy – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations petitioning it.

During August, a corporate entity whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to hear it.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK imposed on him following the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: half that government’s yearly budget. Part of the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen state funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

Politicians promised that these events were not possible. Previously, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An expert on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat has come to pass. In the current period, energy and mining firms have filed a record number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP