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Can you perceive our system of government functions? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. Yet, that was how it used to work. Those days are over.

The Rise of Offshore Tribunals

Today, overseas companies, or the oligarchs that control them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or legal review. The general public cannot take a case to them, nor can our government, including companies headquartered in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These awards are based not on real financial harm but funds the arbitrators decide the company might otherwise have made. The government could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as firms observe each other, and private equity fund legal actions for a share of a portion of the takings. The consequence? Sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and often in a climate of profound opacity – within bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that proposals to open the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Today, this success faces being overturned by an secret arbitration panel answering to no one but the entities bringing the case.

Last August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. We have no idea how much this sum represents. Who is serving as its counsel challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a international entity contests it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it appears probable that he will utilise the tribunal to contest the penalties the UK imposed on him following the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, demanding a colossal sum: an amount representing half state's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this matter described critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “once firms grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with scepticism.

That threat has come to pass. In the current period, oil and gas and extraction companies have lodged a historic level of claims against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to stop environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP