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Can you understand our system of government functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, overseas companies, and the oligarchs behind them, can sue governments for the policies they pass, at private courts made up of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation represent not real financial harm but funds the arbitrators conclude the company might otherwise have made. The administration could be forced to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A System Running Rampant

Historically high figures of disputes are being brought, as firms observe each other, and investment funds finance suits in exchange for a portion of the takings. The consequence? Democratic sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings taken by elected bodies is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the consent the former government had granted. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

During August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have little idea how much this could amount to. What legal team is representing it against the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming $16bn: an amount representing half nation's annual revenue. Included in the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all these agreements, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction has come to pass. This year, energy and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to prevent global warming. Companies have to date won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP