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What is your perceive our system of government functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, and the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, including businesses based in this country. Access is granted only to entities based overseas.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but compensation the panel members decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be deterred from introducing similar legislation along the same lines, worried about being sued.

A System Growing Exponentially

Record numbers of legal actions are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a cut of the awards. The outcome? Sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings enacted by parliaments is that this stipulation has been written – absent public approval, and often in conditions of total confidentiality – inside international trade agreements.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The judge determined that schemes to open the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Now, this victory faces being overturned by an secret arbitration panel accountable to only the companies bringing the case.

Last August, a corporate entity whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to proceed. We have no idea how much this sum represents. Which individual is representing it in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company disputes it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it seems likely that he will utilise the tribunal to fight the sanctions the UK levied against him after the war in Ukraine. He has previously started suing a small nation for this reason, demanding sixteen billion dollars: half that state's yearly budget. Among the lawyers representing him there? the wife of a former prime minister, married to the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that these events could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms grasp the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. Recently, fossil fuel and resource corporations have lodged a historic level of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP