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Can you reckon our system of government operates? Maybe similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Well, that was how it used to work. Not anymore.

The Emergence of Offshore Courts

Nowadays, overseas companies, along with the wealthy individuals who own them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including businesses operating from this country. Access is granted solely for corporations based overseas.

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

These awards constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to rescind the measure. It becomes discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms learn from each other, and hedge funds fund legal actions in return for a share of the awards. The result? National sovereignty and popular rule are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this provision has been written – absent public approval, and typically amid a climate of profound opacity – inside trade treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, activists won a great victory at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the permission the former government had granted. Today, this success could be compromised by an offshore tribunal answering to no one but the corporations filing the suit.

During August, a firm whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the United States was set up to hear it.

The company is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case so far, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK enacted against him following the Russian aggression. He has filed a claim against Luxembourg for this reason, seeking $16bn: an amount representing half nation's yearly budget. Included in the counsel representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this issue labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the authority they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That prediction has now materialised. This year, energy and extraction companies have initiated a record number of claims against nations rich and poor, contesting – like the example of the UK mine – official measures to halt environmental catastrophe. Firms have so far won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP