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How do you perceive our system of government works? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. End of story. However, that’s how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

In the modern era, foreign corporations, and the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at private courts composed of corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for businesses based overseas.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

These awards constitute not tangible damages but compensation the panel members decide the company might otherwise have made. The government could be forced to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and investment funds finance suits in return for a cut of the takings. The result? National sovereignty and democracy are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the permission the Tories had granted. Currently, this success could be compromised by an secret arbitration panel answering to exclusively the corporations bringing the case.

Last August, a company whose final controllers reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Who is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking $16bn: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these scenarios could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this topic described critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies grasp the influence they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That prediction is now a reality. Recently, fossil fuel and mining firms have initiated a record number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have so far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP