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Can you perceive our system of government works? Perhaps something like this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that was how it once functioned. Not anymore.

The Advent of Offshore Courts

Today, international firms, or the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these panels provide no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, including businesses based in this country. Access is granted only to corporations registered abroad.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

This compensation constitute not actual losses but money the panel members decide the company could potentially have made. The state could be forced to rescind the measure. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The result? National sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – into international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had no consequence on our carbon budgets. The new government subsequently revoked the licence the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel answering to exclusively the entities filing the suit.

Last August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was convened to hear it.

This firm is suing the UK for the money it might have made if the mine had received permission to go ahead. Citizens have little idea how much this might be. Which individual is serving as its counsel challenging the British government? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The administration passes a law, the national judiciary upholds it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, seeking $16bn: equivalent to half of state's yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these scenarios were not possible. Years ago, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An adviser on this issue described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP