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How do you understand our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. Yet, that used to be how it operated in the past. No longer.

The Rise of Offshore Tribunals

Nowadays, international firms, or the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. Access is granted exclusively to businesses registered abroad.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it can award damages of vast sums, running into billions.

This compensation are based not on actual losses but funds the tribunal officials determine the company could potentially have made. The state may have to rescind the measure. It becomes hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of cases are being filed, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a share of the awards. The result? National sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings made by legislatures is that this stipulation has been inserted – absent public approval, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The judge determined that plans to open the first deep coalmine in the UK for 30 years, in northwest England, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government later cancelled the consent the former government had issued. Currently, this success faces being overturned by an offshore tribunal reporting to only the companies bringing the case.

Last August, a company whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a tribunal in the United States was established to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had received permission to proceed. We have little idea how much this might be. Who is serving as its counsel challenging the state? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The government enacts a policy, the domestic court validates it, then a international entity contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming $16bn: an amount representing half nation's annual revenue. Among the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events were not possible. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this issue labelled campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. This year, energy and extraction companies have filed a record number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – government attempts to halt global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP