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What is your reckon our system of government operates? It could be along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, and the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies operating from this country. They are open exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, running into billions.

These awards are based not on real financial harm but funds the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It is deterred from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The consequence? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – into international trade agreements.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the senior court. The justice determined that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration later cancelled the consent the Tories had issued. Now, this legal outcome could be compromised by an foreign court reporting to no one but the corporations petitioning it.

During August, a company whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

This firm is suing the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Which individual is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The government makes a decision, the national judiciary upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK enacted against him following the invasion of Ukraine. He has filed a claim against a small nation with similar intent, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the legal team on his side? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that these events wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” A consultant on this matter accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That threat is now a reality. In the current period, fossil fuel and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – similar to the UK mine – official measures to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP