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Can you understand our system of government operates? Perhaps similar to this. We elect 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 was how it used to work. No longer.

The Emergence of Offshore Tribunals

Today, international firms, or the oligarchs who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are held in secret. Unlike our courts, these panels provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for businesses based overseas.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These awards represent not actual losses but compensation the arbitrators decide the company could potentially have made. The state may have to drop the legislation. It becomes deterred 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 firms learn from each other, and investment funds finance suits in return for a share of the takings. The consequence? National sovereignty and democracy are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by legislatures is that this provision has been written – without public consent, and often in an atmosphere of profound opacity – within trade treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice ruled that plans to open the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The new government subsequently revoked the licence the previous administration had issued. Today, this victory faces being overturned by an foreign court accountable to no one but the companies bringing the case.

Last August, a company whose final controllers reside in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. We have no idea how much this sum represents. Which individual is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the panel on the coalmine case was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, demanding $16bn: half that government’s annual revenue. Among the counsel on his side? Cherie Blair, married to the previous PM.

Legal experts contend that the EU’s delay in using frozen Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

The public was told that such things could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this issue accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about such legal actions. Warnings that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That prediction is now a reality. Recently, energy and extraction companies have initiated a record number of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have to date won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP