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How do you reckon our system of government operates? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Rise of Offshore Tribunals

Today, international firms, and the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. They are open only to entities registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of vast sums, running into billions.

This compensation constitute not actual losses but compensation the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It becomes discouraged from enacting future policies of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and private equity fund legal actions in return for a cut of the awards. The outcome? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices enacted by legislatures is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the high court. The presiding officer determined that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had approved. Today, this success faces being overturned by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a firm whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has no clear indication how much this could amount to. Who is acting on its behalf against the state? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a foreign company contests it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it appears probable that he may employ the tribunal to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has started suing a small nation for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

International law scholars argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have filed a historic level of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to halt environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP