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Can you reckon our system of government works? It could be similar to this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. However, that was how it once functioned. Those days are over.

The Advent of Offshore Tribunals

Nowadays, international firms, or the billionaires behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

This compensation are based not on actual losses but compensation the panel members conclude the company could potentially have made. The state might be compelled to abandon its policy. It will be hesitant to introducing similar legislation along the same lines, worried about incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as corporations learn from each other, and private equity fund legal actions for a share of a cut of the settlements. The outcome? Sovereignty and democracy are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings made by parliaments is that this provision has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the licence the Tories had granted. Now, this victory is under threat by an secret arbitration panel reporting to no one but the corporations petitioning it.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have little idea how much this could amount to. Which individual is acting on its behalf against the state? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he may employ the arbitration process to challenge the penalties the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation on these grounds, seeking $16bn: half that government’s yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these scenarios wouldn’t happen. Previously, a former prime minister, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this topic described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. In the current period, oil and gas and extraction companies have filed a record number of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP