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What is your reckon our system of government operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, and the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or legal review. The general public cannot take a case to them, just as our government, including businesses headquartered in this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, even 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 abandon its policy. It is hesitant to passing future laws along the same lines, for fear of facing litigation.

A System Running Rampant

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The new government subsequently revoked the permission the former government had approved. Now, this victory is under threat by an foreign court reporting to only the companies filing the suit.

During August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the United States was convened to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has no clear indication how much this could amount to. What legal team is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he will utilise the tribunal to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has started suing another European state for this reason, seeking sixteen billion dollars: half that nation's yearly income. Included in the lawyers representing him there? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen state funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Growing Costs

The public was told that these scenarios could not occur. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms grasp the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. Recently, fossil fuel and extraction companies have initiated a historic level of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Firms have to date won vast sums by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP