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How do you understand our system of government functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, or the billionaires that control them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these panels allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises operating from this country. They are open solely for businesses registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order damages of vast sums, even billions.

These awards represent not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It will be deterred from introducing similar legislation along the same lines, worried about being sued.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies observe each other, and private equity finance suits for a share of a share of the awards. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by elected bodies is that this clause has been written – without public consent, and often in conditions of extreme secrecy – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the permission the Tories had approved. Today, this victory is under threat by an offshore tribunal answering to exclusively the companies petitioning it.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to proceed. We have no clear indication how much this could amount to. Which individual is serving as its counsel against the British government? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it seems likely that he may employ the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation on these grounds, demanding a colossal sum: half that nation's yearly income. Part of the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that these events were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this matter described critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. In the current period, oil and gas and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP