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How do you perceive our system of government functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even companies based in this country. They are open only to corporations operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on actual losses but funds the tribunal officials decide the company might otherwise have made. The government might be compelled to drop the legislation. It will be hesitant to enacting future policies in that area, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of cases are being filed, as firms learn from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The outcome? Sovereignty and democracy are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings made by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer found that proposals to dig the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The new government then withdrew the licence the Tories had approved. Currently, this success faces being overturned by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a firm whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the US capital was established to hear it.

The company is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf challenging the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the court on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK enacted against him subsequent to the Russian aggression. He has started suing a small nation with similar intent, seeking $16bn: an amount representing half government’s yearly income. Part of the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this topic described campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have lodged a record number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to stop climate breakdown. Firms have to date won $114bn via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP