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What is your perceive our system of government works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Offshore Courts

Today, international firms, and the wealthy individuals behind them, are able to litigate against nation states for the policies they pass, at private courts made up of commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these panels provide no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. The door is open only to businesses registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

This compensation are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The government could be forced to rescind the measure. It will be deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies observe each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? Democratic sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions taken by parliaments is that this stipulation has been written – absent public approval, and frequently under an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer found that plans to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on climate commitments. The new government later cancelled the licence the former government had granted. Currently, this legal outcome could be compromised by an secret arbitration panel answering to only the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. We have little idea how much this could amount to. Which individual is representing it in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The state enacts a policy, the domestic court validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he will utilise the tribunal to fight the restrictions the UK imposed on him after the war in Ukraine. He has previously started suing a small nation for this reason, seeking a colossal sum: half that nation's annual revenue. Part of the legal team representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that such things were not possible. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue described campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP