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How do you understand our system of government works? Perhaps along the lines of this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. However, that’s how it operated in the past. No longer.

The Rise of Shadow Arbitration Panels

Today, international firms, and the oligarchs who own them, have the power to sue governments for the laws they pass, at private courts composed of corporate lawyers. Such disputes are conducted in secret. Unlike our courts, these tribunals provide no right of appeal or legal review. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. They are open solely for businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These sums represent not tangible damages but funds the arbitrators conclude the company might otherwise have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as firms observe each other, and private equity finance suits for a share of a cut of the takings. The consequence? National sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the rulings enacted by elected bodies is that this provision has been inserted – without public consent, and often in a climate of total confidentiality – within bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have zero effect on national carbon targets. The new government later cancelled the consent the previous administration had granted. Now, this victory could be compromised by an offshore tribunal answering to only the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was convened to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. The public has no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The state enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case so far, but it seems likely that he’ll use the tribunal to contest the sanctions the UK enacted against him after the Russian aggression. He has previously filed a claim against Luxembourg for this reason, claiming a colossal sum: an amount representing half government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that such things were not possible. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this issue described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “when companies grasp the authority they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That prediction has come to pass. This year, oil and gas and resource corporations have filed a unprecedented number of suits against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to stop global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP