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Can you perceive our political system works? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

Nowadays, international firms, along with the oligarchs who own them, are able to litigate against nation states for the regulations they pass, at private courts composed of corporate lawyers. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses headquartered in this country. Access is granted solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These awards are based not on real financial harm but money the tribunal officials conclude the company might otherwise have made. The government might be compelled to abandon its policy. It becomes deterred from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being initiated, as companies observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions taken by parliaments is that this clause has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer found that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The new government later cancelled the consent the Tories had granted. Today, this victory is under threat by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a dispute settlement body in the US capital was established to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have little idea how much this sum represents. Who is representing it against the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him following the war in Ukraine. He has already started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's annual revenue. Among the lawyers on his side? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s delay in using frozen Russian assets as security for its financial support package stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this issue labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “when companies start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. Recently, oil and gas and mining firms have filed a historic level of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP