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Can you reckon our political system works? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. However, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Courts

Nowadays, international firms, and the billionaires that control them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. You or I cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to entities operating from foreign soil.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These awards constitute not tangible damages but funds the arbitrators determine the company would perhaps have made. The state might be compelled to abandon its policy. It is discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as firms observe each other, and private equity fund legal actions for a share of a share of the takings. The consequence? National sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions made by elected bodies is that this clause has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – into international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge found that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies bringing the case.

During August, a firm whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. What legal team is representing it challenging the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The state enacts a policy, the national judiciary upholds it, then a foreign company disputes it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it seems likely that he may employ the tribunal to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, demanding $16bn: equivalent to half of nation's yearly budget. Part of the lawyers representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “once firms start to realise the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by scepticism.

That warning has come to pass. This year, fossil fuel and extraction companies have initiated a record number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – official measures to prevent global warming. Companies have thus far won vast sums by using ISDS, of which oil majors have secured $84bn. That represents the combined GDP