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What is your understand our system of government functions? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

Today, overseas companies, or the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at private courts made up of corporate lawyers. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration might be compelled to rescind the measure. It becomes deterred from passing future laws of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as firms learn from each other, and investment funds fund legal actions in exchange for a portion of the takings. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions made by legislatures is that this clause has been written – without public consent, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The justice found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration subsequently revoked the permission the Tories had granted. Today, this victory faces being overturned by an foreign court reporting to only the companies petitioning it.

In August, a corporate entity whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in the United States was established to hear it.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Who is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the domestic court supports it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

On the same day that the court on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he’ll use the tribunal to contest the penalties the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Part of the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that such things were not possible. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” An expert on this matter accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. In the current period, energy and resource corporations have filed a historic level of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP