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How do you reckon our system of government operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Advent of Offshore Tribunals

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of business advocates. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including enterprises operating from this country. The door is open exclusively to businesses operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation constitute not actual losses but funds the panel members decide the company would perhaps have made. The administration might be compelled to drop the legislation. It will be deterred from introducing similar legislation in that area, for fear of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The consequence? Sovereignty and popular rule are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings made by parliaments is that this clause has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coal Mine

Last year, activists won a great victory at the high court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have no impact on national carbon targets. The Labour government then withdrew the permission the Tories had issued. Currently, this success could be compromised by an foreign court accountable to exclusively the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this could amount to. Who is serving as its counsel in opposition to the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK enacted against him after the Russian aggression. He has previously started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that these scenarios were not possible. Previously, a senior politician, promoting the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “once firms grasp the influence bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to prevent climate breakdown. Companies have thus far won vast sums through ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP