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How do you understand our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Today, international firms, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases are held in secret. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to corporations registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These awards constitute not tangible damages but funds the panel members decide the company would perhaps have made. The administration could be forced to drop the legislation. It is hesitant to enacting future policies along the same lines, due to the risk of being sued.

A Process Running Rampant

Record numbers of legal actions are being initiated, as corporations observe each other, and hedge funds fund legal actions for a share of a share of the awards. The consequence? National sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the choices enacted by elected bodies is that this provision has been incorporated – absent public approval, and often in conditions of profound opacity – within trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge determined that schemes to open the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on climate commitments. The new government then withdrew the permission the former government had granted. Currently, this legal outcome could be compromised by an offshore tribunal reporting to exclusively the corporations bringing the case.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has no idea how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Case

Concurrently that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it appears probable that he may employ the arbitration process to contest the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of government’s annual revenue. Part of the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this issue labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. This year, oil and gas and resource corporations have initiated a historic level of suits against nations rich and poor, contesting – as in the case of the UK mine – government attempts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP