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How do you perceive our system of government functions? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Well, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, international firms, and the oligarchs that control them, are able to litigate against governments for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are held in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses based in this country. The door is open solely for entities based overseas.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators determine the company could potentially have made. The government may have to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms learn from each other, and private equity fund legal actions in exchange for a cut of the awards. The outcome? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government subsequently revoked the permission the Tories had granted. Today, this legal outcome is under threat by an foreign court accountable to only the companies bringing the case.

During August, a company whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the domestic court validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, demanding $16bn: an amount representing half government’s yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these scenarios could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this matter described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to prevent global warming. Companies have to date won $114bn by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP