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Can you understand our system of government works? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, along with the billionaires behind them, can sue nation states for the laws they pass, at private courts made up of corporate lawyers. The cases take place away from public scrutiny. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but compensation the panel members determine the company might otherwise have made. The administration could be forced to rescind the measure. It is discouraged from enacting future policies along the same lines, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of disputes are being filed, as companies take cues from each other, and investment funds fund legal actions in exchange for a cut of the awards. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions taken by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The new government later cancelled the licence the former government had approved. Currently, this legal outcome faces being overturned by an foreign court reporting to no one but the companies petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was set up to hear it.

This firm is suing the UK for the money it might have made if the mine had received permission to commence operations. The public has no clear indication how much this could amount to. Who is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive private court, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he will utilise the tribunal to fight the sanctions the UK imposed on him following the Russian aggression. He has previously started suing another European state for this reason, claiming a colossal sum: equivalent to half of state's yearly income. Among the counsel on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that such things wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An expert on this matter accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were greeted by widespread derision.

That warning is now a reality. Recently, oil and gas and mining firms have lodged a unprecedented number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP