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What is your perceive our political system operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Rise of Offshore Courts

Nowadays, overseas companies, and the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to corporations based overseas.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company might otherwise have made. The administration might be compelled to rescind the measure. It will be discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations observe each other, and private equity fund legal actions for a share of a share of the settlements. The result? Sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been written – without public consent, and often in a climate of profound opacity – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government later cancelled the permission the previous administration had granted. Today, this legal outcome is under threat by an foreign court reporting to exclusively the corporations bringing the case.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this might be. What legal team is serving as its counsel challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it is highly possible that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation on these grounds, demanding a colossal sum: half that government’s yearly income. Part of the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that such things were not possible. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this issue described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by ISDS claims. Predictions that “when companies grasp the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with widespread derision.

That threat is now a reality. Recently, energy and resource corporations have filed a unprecedented number of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have thus far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP