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Can you reckon our system of government operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. However, that was how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

In the modern era, overseas companies, or the billionaires behind them, have the power to sue governments for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are held in secret. Unlike our courts, these panels grant no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, including enterprises operating from this country. They are open solely for entities registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation are based not on real financial harm but compensation the arbitrators decide the company could potentially have made. The government might be compelled to drop the legislation. It will be hesitant to passing future laws along the same lines, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations observe each other, and private equity finance suits in exchange for a cut of the settlements. The result? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on national carbon targets. The incoming administration subsequently revoked the permission the Tories had issued. Currently, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the companies filing the suit.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

The claimant is suing the UK for the profits it would have generated if the mine had received permission to proceed. Citizens have no idea how much this sum represents. What legal team is acting on its behalf against the state? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The state enacts a policy, the high court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK levied against him after the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming a colossal sum: an amount representing half nation's annual revenue. Included in the counsel on his side? the wife of a former prime minister, married to 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 concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to prevent global warming. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP