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How do you reckon our system of government operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, or the billionaires behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises operating from this country. They are open solely for entities based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These awards represent not actual losses but funds the arbitrators conclude the company might otherwise have made. The government could be forced to abandon its policy. It is deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as firms observe each other, and private equity finance suits in exchange for a share of the awards. The result? Sovereignty and popular rule are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices taken by elected bodies is that this clause has been written – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge determined that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the consent the Tories had granted. Now, this success faces being overturned by an foreign court reporting to only the companies petitioning it.

In August, a company whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. The public has little idea how much this could amount to. Which individual is representing it in opposition to the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The administration enacts a policy, the domestic court supports it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it seems likely that he may employ the arbitration process to fight the penalties the UK imposed on him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, demanding a colossal sum: equivalent to half of state's yearly income. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An adviser on this topic described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms grasp the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That threat has come to pass. This year, oil and gas and resource corporations have initiated a record number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP