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Can you reckon our system of government operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, overseas companies, and the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases take place behind closed doors. Unlike our courts, these panels grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses headquartered in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, even billions.

These awards represent not real financial harm but funds the tribunal officials determine the company could potentially have made. The administration might be compelled to drop the legislation. It becomes deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The result? Sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by legislatures is that this clause has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that schemes to open the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government then withdrew the licence the previous administration had issued. Currently, this victory could be compromised by an secret arbitration panel reporting to only the entities bringing the case.

During August, a firm whose beneficial owners reside in the tax haven lodged a claim against the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK imposed on him following the Russian aggression. He has previously filed a claim against another European state on these grounds, claiming $16bn: half that government’s annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

Politicians promised that these events could not occur. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this topic accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms begin to understand the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – government attempts to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP