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What is your perceive our system of government works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that was how it used to work. Those days are over.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, and the oligarchs who own them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even businesses operating from this country. They are open only to businesses based overseas.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

These sums are based not on tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and investment funds finance suits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings taken by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The judge determined that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had issued. Today, this legal outcome could be compromised by an offshore tribunal accountable to no one but the entities petitioning it.

Last August, a company whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The government makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it appears probable that he’ll use the tribunal to fight the restrictions the UK imposed on him after the Russian aggression. He has filed a claim against Luxembourg on these grounds, seeking $16bn: an amount representing half government’s yearly income. Part of the lawyers on his side? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as security for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these scenarios could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An expert on this matter labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That warning has now materialised. Recently, oil and gas and mining firms have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – official measures to stop climate breakdown. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP