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What is your understand our system of government works? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Today, overseas companies, along with the oligarchs that control them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. The door is open only to businesses registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These awards represent not real financial harm but compensation the arbitrators determine the company would perhaps have made. The administration might be compelled to drop the legislation. It will be hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The result? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings made by parliaments is that this stipulation has been written – without public consent, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Example: The UK Coal Mine

A year ago, activists secured a significant win at the senior court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine could have no consequence on national carbon targets. The Labour government later cancelled the consent the previous administration had granted. Now, this victory faces being overturned by an offshore tribunal answering to exclusively the entities petitioning it.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf against the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has already filed a claim against a small nation for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly income. Part of the counsel on his side? Cherie Blair, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events could not occur. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” A consultant on this issue labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. Recently, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Companies have so far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP