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Can you perceive our system of government works? Maybe similar to this. Citizens choose MPs. They legislate on bills. Should 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. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held away from public scrutiny. Unlike our courts, these panels grant no right of appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted exclusively to businesses operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These awards are based not on tangible damages but funds the tribunal officials decide the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and private equity finance suits in return for a cut of the takings. The result? Democratic sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the high court. The judge ruled that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the permission the Tories had issued. Now, this victory faces being overturned by an foreign court answering to only the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the United States was established to adjudicate on it.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this could amount to. Who is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he will utilise the arbitration process to challenge the penalties the UK enacted against him following the war in Ukraine. He has previously filed a claim against a small nation with similar intent, demanding a colossal sum: an amount representing half state'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.

International law scholars contend that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that such things could not occur. In 2014, a government leader, championing the biggest and most dangerous of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this issue labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. This year, oil and gas and resource corporations have initiated a unprecedented number of suits against nations rich and poor, challenging – similar to the UK mine – government attempts to halt environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP