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How do you perceive our system of government operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Today, overseas companies, and the oligarchs that control them, can sue governments for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases take place in secret. Unlike our courts, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including enterprises headquartered in this country. They are open only to businesses operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it can award damages of vast sums, even billions.

These sums constitute not tangible damages but money the tribunal officials determine the company could potentially have made. The administration may have to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a share of the takings. The result? Sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions enacted by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of profound opacity – within international trade agreements.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration then withdrew the licence the Tories had granted. Today, this success could be compromised by an foreign court answering to no one but the corporations filing the suit.

During August, a firm whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had received permission to commence operations. The public has no idea how much this sum represents. Who is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he will utilise the tribunal to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming $16bn: equivalent to half of state's annual revenue. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that such things wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations grasp the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That prediction has come to pass. In the current period, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP