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Can you perceive our system of government works? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, along with the oligarchs behind them, can sue nation states for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including businesses operating from this country. Access is granted only to entities based overseas.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it can award compensation of vast sums, running into billions.

These sums constitute not real financial harm but compensation the panel members conclude the company would perhaps have made. The administration could be forced to drop the legislation. It is discouraged from enacting future policies along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a cut of the awards. The outcome? National sovereignty and popular rule are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the choices taken by elected bodies is that this provision has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Case: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration then withdrew the permission the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel accountable to no one but the corporations bringing the case.

In August, a company whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has filed a claim against a small nation with similar intent, demanding a colossal sum: half that nation's yearly budget. Part of the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An adviser on this issue accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “once firms begin to understand the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That warning has come to pass. Recently, oil and gas and extraction companies have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have to date won vast sums through ISDS, of which energy giants have secured the majority. That represents the combined GDP