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What is your reckon our system of government operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, international firms, and the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by business advocates. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards represent not real financial harm but money the panel members determine the company could potentially have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of being sued.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices taken by legislatures is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the permission the Tories had approved. Today, this legal outcome could be compromised by an offshore tribunal accountable to only the companies bringing the case.

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

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no idea how much this might be. What legal team is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The state passes a law, the high court upholds it, then a foreign company contests it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it is highly possible that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has filed a claim against another European state for this reason, claiming sixteen billion dollars: half that state's yearly income. Included in the counsel on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that these events were not possible. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That threat is now a reality. Recently, energy and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP