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Can you perceive our system of government operates? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that was how it used to work. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at private courts staffed by business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to businesses registered abroad.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it may order damages of vast sums, running into billions.

This compensation represent not real financial harm but funds the panel members determine the company would perhaps have made. The government might be compelled to drop the legislation. It is hesitant to enacting future policies along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds finance suits in return for a cut of the settlements. The result? Democratic sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices taken by legislatures is that this clause has been incorporated – without public consent, and typically amid conditions of extreme secrecy – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, activists won a great victory at the high court. The presiding officer found that schemes to open the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the Tories had granted. Today, this legal outcome is under threat by an foreign court accountable to exclusively the corporations petitioning it.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in the United States was convened to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. The public has little idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the domestic court supports it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK levied against him following the Russian aggression. He has initiated proceedings against a small nation on these grounds, demanding $16bn: an amount representing half nation's yearly budget. Among the legal team on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these events were not possible. Years ago, a senior politician, championing the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” An expert on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has now materialised. Recently, energy and extraction companies have initiated a record number of cases against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP