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What is your perceive our system of government functions? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. Access is granted only to businesses operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it can award compensation of vast sums, even billions.

This compensation constitute not tangible damages but compensation the arbitrators decide the company could potentially have made. The government may have to rescind the measure. It becomes deterred from enacting future policies along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations take cues from each other, and hedge funds finance suits in return for a portion of the awards. The consequence? National sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the licence the previous administration had issued. Currently, this success faces being overturned by an offshore tribunal accountable to only the entities bringing the case.

During August, a company whose ultimate owners are based in the tax haven lodged a claim against the UK government. Recently a tribunal in the United States was convened to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has little idea how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of nation's yearly income. Among the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that such things were not possible. Previously, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An adviser on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That warning has now materialised. Recently, oil and gas and resource corporations have initiated a record number of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP