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Can you perceive our system of government works? Maybe something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Nowadays, overseas companies, along with the billionaires behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of business advocates. The cases are held away from public scrutiny. Unlike our courts, these panels grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. They are open exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

This compensation are based not on tangible damages but funds the arbitrators decide the company would perhaps have made. The state might be compelled to abandon its policy. It becomes discouraged from enacting future policies in that area, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being brought, as firms take cues from each other, and private equity finance suits in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings taken by legislatures is that this provision has been written – without public consent, and frequently under a climate of total confidentiality – into international trade agreements.

A Concrete Instance: The UK Coalmine

A year ago, activists achieved a major legal triumph at the high court. The judge ruled that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the permission the former government had approved. Today, this victory is under threat by an secret arbitration panel accountable to only the companies filing the suit.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. We have no idea how much this sum represents. Who is serving as its counsel against the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a foreign company contests it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he may employ the tribunal to challenge the restrictions the UK imposed on him after the Russian aggression. He has started suing a small nation with similar intent, demanding sixteen billion dollars: half that nation's yearly income. Among the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms grasp the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction has now materialised. In the current period, oil and gas and resource corporations have lodged a record number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP