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How do you perceive our system of government works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Courts

Today, international firms, along with the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at private courts made up of commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including companies headquartered in this country. They are open solely for entities operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

These sums constitute not real financial harm but funds the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It is hesitant to enacting future policies along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer found that plans to open the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had issued. Currently, this victory faces being overturned by an foreign court answering to exclusively the entities petitioning it.

In August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

This firm is suing the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this could amount to. What legal team is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it seems likely that he will utilise the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has started suing Luxembourg for this reason, seeking $16bn: half that government’s yearly income. Among the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this topic described critics of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Warnings that “as corporations begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That warning has now materialised. In the current period, energy and mining firms have filed a record number of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to stop global warming. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP