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Can you perceive our political system works? Perhaps similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Emergence of Offshore Courts

Today, international firms, and the oligarchs behind them, have the power to sue nation states for the laws they pass, at private courts composed of business advocates. The cases take place behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, including businesses based in this country. They are open solely for corporations based overseas.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

These awards constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The state could be forced to abandon its policy. It is hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as corporations learn from each other, and hedge funds finance suits in return for a share of the settlements. The consequence? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings taken by parliaments is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer found that plans to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the consent the Tories had granted. Now, this victory is under threat by an secret arbitration panel reporting to no one but the corporations bringing the case.

In August, a company whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. What legal team is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming $16bn: an amount representing half state's annual revenue. Included in the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this matter accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies start to realise the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP