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What is your reckon our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. However, that was how it once functioned. No longer.

The Rise of Offshore Courts

Nowadays, international firms, or the oligarchs that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even businesses based in this country. The door is open only to entities registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

This compensation constitute not actual losses but compensation the panel members decide the company might otherwise have made. The government might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies observe each other, and hedge funds fund legal actions in exchange for a portion of the awards. The outcome? Sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings made by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the licence the former government had issued. Now, this success is under threat by an foreign court reporting to no one but the companies petitioning it.

During August, a company whose beneficial owners are located in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have little idea how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The administration makes a decision, the national judiciary supports it, then a overseas corporation disputes it through an secretive private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the restrictions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, claiming a colossal sum: an amount representing half government’s yearly income. Among the legal team representing him there? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

We were assured that these scenarios were not possible. Previously, a senior politician, advocating for 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 issue in the past.” A consultant on this matter labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. Recently, fossil fuel and mining firms have initiated a historic level of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to stop environmental catastrophe. Firms have thus far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP