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What is your reckon our system of government functions? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Rise of Offshore Courts

Nowadays, international firms, along with the wealthy individuals who own them, can sue elected administrations for the policies they pass, at private courts made up of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open only to businesses registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These sums represent not real financial harm but money the tribunal officials decide the company might otherwise have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation in that area, worried about facing litigation.

A System Running Rampant

Record numbers of disputes are being initiated, as firms observe each other, and investment funds finance suits for a share of a portion of the awards. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions taken by elected bodies is that this provision has been written – without democratic mandate, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer determined that proposals to open the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the licence the previous administration had approved. Today, this success could be compromised by an foreign court answering to only the entities filing the suit.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is suing the UK for the money it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration makes a decision, the domestic court supports it, then a foreign company disputes it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it seems likely that he will utilise the arbitration process to contest the penalties the UK levied against him after the Russian aggression. He has previously initiated proceedings against a small nation for this reason, seeking $16bn: an amount representing half nation's yearly budget. Included in the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these scenarios were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this issue described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “when companies grasp the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and extraction companies have lodged a record number of claims against nations rich and poor, challenging – similar to the UK mine – state efforts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP