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How do you perceive our system of government works? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that used to be how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, international firms, and the wealthy individuals that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises operating from this country. Access is granted solely for entities based overseas.

If a tribunal finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

This compensation constitute not real financial harm but funds the panel members decide the company could potentially have made. The government might be compelled to abandon its policy. It is hesitant to passing future laws along the same lines, worried about being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The consequence? National sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings enacted by legislatures is that this stipulation has been inserted – absent public approval, and frequently under conditions of total confidentiality – inside trade treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the licence the previous administration had granted. Now, this victory faces being overturned by an foreign court answering to exclusively the corporations petitioning it.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the United States was established to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The state enacts a policy, the high court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case so far, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against another European state with similar intent, seeking $16bn: an amount representing half state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen state funds as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that such things were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An expert on this matter described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That warning has now materialised. This year, oil and gas and extraction companies have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to stop global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP