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How do you perceive our system of government operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills become law. The law is upheld by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, and the oligarchs behind them, have the power to sue governments for the laws they pass, at private courts staffed by commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. They are open only to businesses registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These sums are based not on real financial harm but money the panel members decide the company could potentially have made. The government may have to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as companies take cues from each other, and hedge funds finance suits in return for a cut of the awards. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by elected bodies is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Last year, activists won a great victory at the senior court. The justice determined that schemes to dig the first major coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government later cancelled the consent the previous administration had issued. Currently, this legal outcome could be compromised by an foreign court accountable to exclusively the corporations filing the suit.

During August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in Washington DC was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it is highly possible that he will utilise the tribunal to contest the penalties the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding a colossal sum: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these scenarios were not possible. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this topic described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “as corporations start to realise the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That prediction has now materialised. Recently, oil and gas and resource corporations have filed a record number of cases against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP