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Can you perceive our political system operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, international firms, along with the billionaires behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open exclusively to entities based overseas.

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

This compensation are based not on tangible damages but funds the arbitrators decide the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to enacting future policies in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as corporations learn from each other, and hedge funds fund legal actions in exchange for a share of the settlements. The consequence? Democratic sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by elected bodies is that this stipulation has been inserted – without public consent, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Example: The UK Coalmine

Last year, environmental campaigners won a great victory at the senior court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have zero effect on climate commitments. The Labour government then withdrew the consent the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal accountable to only the entities petitioning it.

Last August, a corporate entity whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the money it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he’ll use the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, demanding $16bn: equivalent to half of nation's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

The public was told that such things wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. Recently, energy and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won $114bn by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP