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How do you perceive our system of government functions? Perhaps something like this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

Today, overseas companies, along with the wealthy individuals behind them, can sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. The door is open solely for entities based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the panel members conclude the company might otherwise have made. The administration could be forced to drop the legislation. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as firms observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The outcome? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the choices taken by legislatures is that this clause has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – inside international trade agreements.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The judge found that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had approved. Today, this legal outcome faces being overturned by an foreign court answering to no one but the companies petitioning it.

Last August, a corporate entity whose final controllers are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it seems likely that he may employ the tribunal to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s delay in utilising seized state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” An expert on this topic accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a unprecedented number of claims against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to stop climate breakdown. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP