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How do you understand our system of government works? It could be something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, and the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, including enterprises operating from this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums are based not on real financial harm but funds the tribunal officials determine the company might otherwise have made. The government might be compelled to drop the legislation. It will be hesitant to passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The result? National sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices enacted by elected bodies is that this clause has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Currently, this success is under threat by an offshore tribunal reporting to no one but the companies bringing the case.

In August, a company whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. Which individual is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot the MP. The government enacts a policy, the high court validates it, then a overseas corporation disputes it through an secretive private court, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the restrictions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg with similar intent, claiming a colossal sum: half that nation's yearly budget. Included in the legal team on his side? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these scenarios could not occur. Previously, a government leader, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has never been a case in the past.” An expert on this topic described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That warning is now a reality. Recently, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – official measures to stop climate breakdown. Companies have thus far won $114bn via ISDS, of which oil majors have obtained the majority. That represents the combined GDP