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How do you reckon our system of government works? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. However, that was how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs that control them, can sue nation states for the regulations they pass, at private courts composed of corporate lawyers. The cases take place in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public cannot take a case to them, just as our government, including enterprises based in this country. Access is granted only to corporations based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but compensation the tribunal officials conclude the company would perhaps have made. The government may have to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under a climate of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The justice found that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had approved. Today, this success could be compromised by an secret arbitration panel accountable to only the corporations bringing the case.

During August, a firm whose final controllers are based in the tax haven lodged a claim against the UK government. Recently a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company contests it through an secretive private court, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to challenge the sanctions the UK levied against him following the war in Ukraine. He has filed a claim against another European state for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Included in the legal team on his side? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that such things were not possible. Previously, a government leader, promoting the largest and riskiest of all such treaties, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about such legal actions. Warnings that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a record number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP