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How do you reckon our system of government operates? It could be similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Courts

In the modern era, overseas companies, and the oligarchs who own them, can sue nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies operating from this country. Access is granted solely for corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but compensation the tribunal officials decide the company would perhaps have made. The government could be forced to rescind the measure. It is hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as firms learn from each other, and private equity fund legal actions in return for a cut of the settlements. The result? National sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices enacted by legislatures is that this provision has been inserted – absent public approval, and typically amid conditions of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that schemes to open the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration later cancelled the permission the former government had approved. Now, this victory is under threat by an secret arbitration panel reporting to no one but the entities filing the suit.

Last August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim against the UK government. Last week a tribunal in the United States was set up to hear it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case at present, but it seems likely that he will utilise the tribunal to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has already started suing Luxembourg for this reason, demanding $16bn: an amount representing half government’s yearly income. Among the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that these events could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An adviser on this topic described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Warnings that “once firms start to realise the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with scepticism.

That threat has now materialised. In the current period, energy and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have to date won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP