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Can you reckon our system of government works? Maybe similar to this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. Well, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, foreign corporations, or the billionaires that control them, can sue governments for the laws they pass, at secret arbitration panels composed of business advocates. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums represent not real financial harm but funds the arbitrators determine the company might otherwise have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as firms take cues from each other, and private equity finance suits for a share of a cut of the awards. The result? National sovereignty and democracy are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions made by legislatures is that this provision has been inserted – without democratic mandate, and typically amid a climate of extreme secrecy – inside international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have no impact on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

Last August, a company whose final controllers are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Who is representing it in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming sixteen billion dollars: half that government’s yearly income. Among the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that such things could not occur. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies start to realise the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. Recently, energy and resource corporations have initiated a unprecedented number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP