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Can you perceive our political system works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that used to be how it once functioned. No longer.

The Advent of Offshore Courts

Nowadays, overseas companies, along with the billionaires behind them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted only to corporations based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

This compensation constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as firms learn from each other, and hedge funds fund legal actions in return for a portion of the awards. The result? National sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by legislatures is that this stipulation has been incorporated – without public consent, and often in an atmosphere of profound opacity – within trade treaties.

A Concrete Example: The UK Coalmine

Last year, activists secured a significant win at the High Court. The judge found that schemes to open the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government then withdrew the licence the Tories had issued. Now, this success is under threat by an foreign court accountable to only the companies bringing the case.

In August, a company whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. The public has no clear indication how much this sum represents. Which individual is representing it against the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government passes a law, the national judiciary validates it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

The Russian Case

Concurrently that the court on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation on these grounds, demanding sixteen billion dollars: an amount representing half government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, wife of the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Risks

We were assured that these events could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An adviser on this issue described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “once firms start to realise the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. Recently, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to stop climate breakdown. Companies have so far won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP