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Can you reckon our system of government operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

In the modern era, foreign corporations, and the oligarchs that control them, have the power to sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held behind closed doors. Unlike our courts, these tribunals allow no right of appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is deterred from enacting future policies in that area, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a share of the takings. The consequence? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the rulings made by parliaments is that this provision has been inserted – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the high court. The judge determined that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the former government had issued. Currently, this victory could be compromised by an offshore tribunal answering to only the corporations bringing the case.

In August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Who is representing it against the state? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a overseas corporation disputes it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK imposed on him after the Russian aggression. He has previously started suing Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half state's annual revenue. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine arises from concerns within Belgium 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 finance Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these scenarios could not occur. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. This year, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to prevent global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP