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How do you reckon our system of government operates? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. That's it. However, that used to be how it once functioned. No longer.

The Rise of Offshore Courts

In the modern era, international firms, or the oligarchs behind them, can sue nation states for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies operating from this country. They are open solely for corporations registered abroad.

Should an arbitration panel rules that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These awards represent not actual losses but funds the arbitrators decide the company might otherwise have made. The administration may have to rescind the measure. It is discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as companies observe each other, and private equity finance suits in return for a portion of the settlements. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings made by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The new government subsequently revoked the consent the Tories had granted. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the corporations petitioning it.

In August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to proceed. The public has little idea how much this sum represents. What legal team is serving as its counsel challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he may employ the tribunal to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing another European state with similar intent, seeking a colossal sum: an amount representing half government’s yearly income. Part of the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that such things were not possible. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear such legal actions. Warnings that “when companies start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning has now materialised. In the current period, oil and gas and mining firms have lodged a historic level of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Companies have to date won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP