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Can you understand our system of government works? It could be something like this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Advent of Offshore Courts

Today, international firms, and the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including companies based in this country. Access is granted solely for entities operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but funds the panel members decide the company would perhaps have made. The state could be forced to drop the legislation. It becomes discouraged from passing future laws in that area, worried about facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being initiated, as firms observe each other, and hedge funds finance suits in return for a share of the settlements. The result? Sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions taken by legislatures is that this clause has been inserted – without public consent, and typically amid a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The UK Coal Mine

Last year, environmental campaigners won a great victory at the high court. The judge determined that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The Labour government later cancelled the licence the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the companies filing the suit.

In August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is serving as its counsel against the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The state enacts a policy, the high court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state for this reason, seeking sixteen billion dollars: half that government’s yearly income. Part of the counsel representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Risks

The public was told that these scenarios were not possible. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this topic described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, oil and gas and extraction companies have initiated a unprecedented number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP