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How do you perceive our system of government operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, or the oligarchs that control them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open solely for corporations registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but compensation the tribunal officials conclude the company could potentially have made. The state could be forced to rescind the measure. It will be discouraged from passing future laws of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations observe each other, and investment funds fund legal actions in return for a cut of the settlements. The outcome? Sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the rulings enacted by elected bodies is that this provision has been written – absent public approval, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice determined that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government later cancelled the permission the Tories had granted. Currently, this legal outcome is under threat by an offshore tribunal answering to no one but the corporations petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration enacts a policy, the high court upholds it, then a international entity challenges it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case at present, but it appears probable that he’ll use the tribunal to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing another European state on these grounds, seeking a colossal sum: equivalent to half of government’s yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s delay in using frozen state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that such things could not occur. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this issue labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP