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Can you perceive our system of government functions? It could be similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Arbitration Panels

Today, international firms, or the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these panels provide no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but funds the panel members conclude the company might otherwise have made. The state might be compelled to rescind the measure. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies take cues from each other, and investment funds finance suits in return for a cut of the takings. The result? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings taken by parliaments is that this provision has been incorporated – absent public approval, and often in a climate of extreme secrecy – into trade treaties.

A Concrete Example: The Cumbrian Coal Mine

A year ago, activists won a great victory at the High Court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had approved. Currently, this success faces being overturned by an offshore tribunal answering to only the entities petitioning it.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in the United States was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have little idea how much this sum represents. What legal team is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court supports it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he will utilise the arbitration process to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: half that government’s yearly income. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these events wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this issue labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “when companies start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That prediction has now materialised. In the current period, oil and gas and resource corporations have lodged a record number of suits against nations rich and poor, challenging – like the example of the UK mine – state efforts to stop climate breakdown. Corporations have to date won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP