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How do you perceive our system of government operates? Perhaps something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Emergence of Offshore Courts

In the modern era, international firms, and the oligarchs behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted in secret. Unlike our courts, these panels allow no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to businesses based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s anticipated profits, it can award damages of vast sums, even billions.

This compensation represent not tangible damages but funds the panel members decide the company might otherwise have made. The government could be forced to drop the legislation. It becomes hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as firms learn from each other, and investment funds bankroll lawsuits in return for a share of the awards. The consequence? Democratic sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions taken by legislatures is that this stipulation has been written – absent public approval, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The justice found that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had issued. Now, this success faces being overturned by an offshore tribunal answering to no one but the companies bringing the case.

During August, a company whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was set up 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 commence operations. The public has no idea how much this could amount to. Which individual is representing it against the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it appears probable that he’ll use the tribunal to contest the penalties the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against another European state for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized Russian assets as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that such things wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat is now a reality. Recently, fossil fuel and extraction companies have initiated a record number of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have so far won vast sums via ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP