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Can you understand our system of government functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels provide no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses headquartered in this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These awards are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes discouraged from enacting future policies in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies take cues from each other, and investment funds finance suits in exchange for a share of the awards. The result? National sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings made by parliaments is that this provision has been incorporated – absent public approval, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government subsequently revoked the licence the previous administration had approved. Currently, this legal outcome is under threat by an foreign court reporting to only the companies filing the suit.

In August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was established to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. The public has no clear indication how much this could amount to. What legal team is representing it challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The state enacts a policy, the high court upholds it, then a international entity contests it through an undemocratic private court, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has previously started suing Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that such things wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, oil and gas and mining firms have lodged a record number of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP