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How do you perceive our system of government functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, international firms, and the billionaires that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. They are open only to corporations based overseas.

If a tribunal finds that a government measure could harm the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

This compensation are based not on actual losses but compensation the panel members determine the company might otherwise have made. The state may have to rescind the measure. It will be discouraged from introducing similar legislation in that area, for fear of being sued.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in return for a cut of the takings. The outcome? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions enacted by legislatures is that this stipulation has been written – absent public approval, and frequently under a climate of total confidentiality – within international trade agreements.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the high court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the consent the former government had issued. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

During August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Which individual is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it seems likely that he may employ the arbitration process to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has previously started suing another European state on these grounds, claiming sixteen billion dollars: half that state's yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that these events wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” A consultant on this topic described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with scepticism.

That threat has come to pass. This year, energy and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – state efforts to halt environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP