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Can you understand our system of government operates? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Today, international firms, along with the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to corporations based overseas.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but money the panel members decide the company would perhaps have made. The government could be forced to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as corporations observe each other, and investment funds finance suits in return for a portion of the takings. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices made by legislatures is that this provision has been written – without democratic mandate, and typically amid conditions of profound opacity – within international trade agreements.

A Specific Instance: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice determined that plans to open the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The new government then withdrew the licence the previous administration had approved. Now, this legal outcome faces being overturned by an foreign court reporting to no one but the entities filing the suit.

During August, a corporate entity whose final controllers reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the court on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK imposed on him after the invasion of Ukraine. He has started suing a small nation with similar intent, seeking a colossal sum: equivalent to half of state's yearly income. Part of the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that such things wouldn’t happen. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” An expert on this issue accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. In the current period, fossil fuel and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the UK mine – state efforts to stop global warming. Companies have so far won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP