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What is your perceive our system of government operates? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Yet, that used to be how it used to work. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, and the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at private courts staffed by commercial attorneys. Such disputes take place in secret. Unlike our courts, these tribunals allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open only to entities operating from foreign soil.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it can award damages of vast sums, running into billions.

These awards constitute not real financial harm but compensation the arbitrators decide the company might otherwise have made. The administration could be forced to abandon its policy. It will be discouraged from introducing similar legislation in that area, for fear of being sued.

A Process Growing Exponentially

Record numbers of cases are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings enacted by parliaments is that this provision has been written – absent public approval, and often in a climate of profound opacity – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The Labour government then withdrew the consent the former government had approved. Today, this victory could be compromised by an foreign court reporting to exclusively the entities bringing the case.

In August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this might be. What legal team is representing it challenging the British government? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it seems likely that he will utilise the tribunal to contest the sanctions the UK imposed on him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, demanding $16bn: equivalent to half of nation's annual revenue. Part of the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that such things could not occur. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has not been 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 prevailing narrative was crafted to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has now materialised. In the current period, oil and gas and resource corporations have lodged a unprecedented number of cases against nations rich and poor, challenging – similar to the Whitehaven project – official measures to stop global warming. Firms have to date won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP