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Can you perceive our system of government works? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, overseas companies, or the billionaires who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to 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. The door is open solely for corporations based overseas.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but compensation the panel members determine the company would perhaps have made. The state might be compelled to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of disputes are being filed, as corporations learn from each other, and investment funds fund legal actions for a share of a cut of the settlements. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the decisions taken by legislatures is that this provision has been written – without public consent, and typically amid conditions of extreme secrecy – within international trade agreements.

A Specific Case: The UK Coalmine

Last year, environmental campaigners won a great victory at the senior court. The judge ruled that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The new government then withdrew the licence the previous administration had approved. Currently, this victory could be compromised by an foreign court answering to no one but the corporations petitioning it.

Last August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit against the UK government. Last week a tribunal in the United States was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this could amount to. Who is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK levied against him following the war in Ukraine. He has already initiated proceedings against Luxembourg on these grounds, claiming $16bn: equivalent to half of state's yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that such things could not occur. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this matter accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That threat is now a reality. In the current period, energy and mining firms have filed a record number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to halt climate breakdown. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP