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What is your understand our system of government operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even companies headquartered in this country. They are open only to corporations based overseas.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation constitute not actual losses but compensation the tribunal officials decide the company could potentially have made. The government could be forced to rescind the measure. It becomes discouraged from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms learn from each other, and investment funds finance suits for a share of a portion of the awards. The outcome? National sovereignty and popular rule are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions enacted by parliaments is that this clause has been inserted – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The new government then withdrew the permission the Tories had approved. Today, this legal outcome could be compromised by an foreign court accountable to no one but the entities bringing the case.

Last August, a corporate entity whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel challenging the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the panel 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, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against a small nation for this reason, claiming $16bn: half that state's annual revenue. Included in the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this issue described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies grasp the power they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with general mockery.

That warning has come to pass. Recently, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – official measures to stop climate breakdown. Firms have so far won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP