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Can you understand our system of government operates? It could be something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Statutes is maintained by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, and the billionaires behind them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including companies operating from this country. The door is open solely for entities registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not actual losses but money the tribunal officials decide the company might otherwise have made. The government might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as firms learn from each other, and investment funds fund legal actions in return for a cut of the settlements. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Example: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government later cancelled the permission the previous administration had issued. Currently, this victory could be compromised by an offshore tribunal answering to no one but the corporations petitioning it.

In August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Which individual is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, demanding a colossal sum: equivalent to half of nation's yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this matter labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP