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What is your understand our political system works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Emergence of Offshore Courts

In the modern era, international firms, or the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, including companies headquartered in this country. Access is granted only to entities registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but compensation the arbitrators determine the company would perhaps have made. The state could be forced to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as companies learn from each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The result? National sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices made by parliaments is that this stipulation has been written – without public consent, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The judge determined that proposals to excavate the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the consent the Tories had issued. Today, this success is under threat by an foreign court reporting to only the corporations bringing the case.

During August, a company whose final controllers are located in the tax haven initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is representing it challenging the state? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, seeking $16bn: an amount representing half government’s annual revenue. Part of the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that such things were not possible. In 2014, a government leader, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter labelled activists of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. In the current period, fossil fuel and mining firms have filed a record number of suits against nations both wealthy and developing, contesting – similar to the UK mine – official measures to halt environmental catastrophe. Companies have to date won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP