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Can you reckon our system of government functions? It could be something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, and the billionaires that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open exclusively to corporations registered abroad.

If a tribunal rules that a government measure 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 actual losses but money the tribunal officials conclude the company might otherwise have made. The state could be forced to drop the legislation. It is deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and private equity finance suits in exchange for a cut of the awards. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices taken by legislatures is that this clause has been written – without public consent, and often in an atmosphere of total confidentiality – within international trade agreements.

A Concrete Case: The UK Coalmine

Last year, activists secured a significant win at the high court. The presiding officer determined that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government then withdrew the licence the former government had issued. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

Last August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is representing it against the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration enacts a policy, the domestic court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he may employ the tribunal to challenge the restrictions the UK enacted against him following the Russian aggression. He has initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this issue described campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That threat has come to pass. This year, energy and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP