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How do you perceive our system of government works? It could be similar to this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at private courts composed of business advocates. The cases are held in secret. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open only to businesses operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums represent not tangible damages but compensation the panel members decide the company would perhaps have made. The government might be compelled to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as corporations observe each other, and hedge funds fund legal actions in return for a portion of the awards. The outcome? National sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices taken by elected bodies is that this provision has been written – absent public approval, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Today, this victory is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The government enacts a policy, the high court supports it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it seems likely that he may employ the arbitration process to fight the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios could not occur. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this matter labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries should be concerned by such legal actions. Predictions that “once firms begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat is now a reality. In the current period, energy and mining firms have filed a record number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to stop environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP