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What is your perceive our system of government works? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. However, that’s how it used to work. Those days are over.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, along with the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held behind closed doors. Differing from national judiciaries, these panels provide no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but money the arbitrators determine the company could potentially have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being brought, as firms learn from each other, and investment funds finance suits in exchange for a cut of the settlements. The result? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by elected bodies is that this clause has been written – without democratic mandate, and often in conditions of profound opacity – into international trade agreements.

A Specific Case: The UK Coalmine

A year ago, activists won a great victory at the senior court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The new government then withdrew the permission the former government had approved. Now, this legal outcome is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has little idea how much this sum represents. What legal team is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a international entity disputes it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Case

On the same day that the panel on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it appears probable that he may employ the tribunal to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against a small nation on these grounds, seeking $16bn: an amount representing half state's annual revenue. Among the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this topic described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That warning is now a reality. Recently, oil and gas and resource corporations have filed a record number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to stop climate breakdown. Corporations have so far won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP