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Can you reckon our system of government works? It could be something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, along with the oligarchs who own them, can sue elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these panels allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even enterprises based in this country. They are open solely for corporations based overseas.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it can award compensation of vast sums, even billions.

These sums are based not on tangible damages but money the tribunal officials conclude the company might otherwise have made. The state might be compelled to rescind the measure. It becomes deterred from introducing similar legislation in that area, for fear of being sued.

A System Running Rampant

Record numbers of legal actions are being brought, as firms learn from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The result? National sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices taken by legislatures is that this clause has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice found that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the Tories had granted. Now, this victory faces being overturned by an secret arbitration panel answering to exclusively the entities bringing the case.

During August, a firm whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have little idea how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation for this reason, seeking a colossal sum: equivalent to half of state's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these scenarios were not possible. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms begin to understand the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with scepticism.

That warning has now materialised. In the current period, oil and gas and resource corporations have initiated a historic level of cases against nations both wealthy and developing, opposing – similar to the UK mine – state efforts to stop climate breakdown. Companies have to date won $114bn by using ISDS, of which oil majors have secured the majority. That equates to the combined GDP