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How do you understand our political system operates? It could be similar to this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is maintained by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

In the modern era, international firms, or the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by corporate lawyers. The cases take place in secret. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. The door is open exclusively to businesses registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the tribunal officials determine the company would perhaps have made. The government might be compelled to drop the legislation. It is deterred from enacting future policies in that area, worried about being sued.

A Process Growing Exponentially

Record numbers of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions in return for a portion of the awards. The consequence? National sovereignty and popular rule are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the rulings enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under a climate of profound opacity – within international trade agreements.

A Specific Instance: The UK Coal Mine

Last year, environmental campaigners won a great victory at the high court. The justice determined that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the consent the Tories had issued. Currently, this success could be compromised by an secret arbitration panel answering to exclusively the companies bringing the case.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. We have little idea how much this sum represents. What legal team is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it is highly possible that he may employ the arbitration process to contest the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation for this reason, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that these events were not possible. Previously, a senior politician, championing the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with general mockery.

That threat has come to pass. Recently, oil and gas and resource corporations have initiated a historic level of claims against nations rich and poor, contesting – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP