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How do you reckon our system of government works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Advent of Offshore Courts

Today, overseas companies, along with the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases are held in secret. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open solely for entities based overseas.

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

This compensation constitute not tangible damages but funds the panel members determine the company could potentially have made. The administration could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The consequence? National sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The justice determined that schemes to open the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the licence the previous administration had approved. Currently, this success is under threat by an offshore tribunal reporting to no one but the companies petitioning it.

Last August, a firm whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. Recently a arbitration panel in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to go ahead. The public has little idea how much this might be. What legal team is acting on its behalf against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The government makes a decision, the high court supports it, then a foreign company challenges it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: half that government’s annual revenue. Included in the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An expert on this topic labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “once firms grasp 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. Recently, energy and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the UK mine – official measures to prevent environmental catastrophe. Companies have thus far won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP