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What is your understand our system of government works? It could be similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

Nowadays, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open only to businesses registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not real financial harm but money the panel members conclude the company might otherwise have made. The administration may have to drop the legislation. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of cases are being filed, as firms observe each other, and hedge funds finance suits for a share of a cut of the awards. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices enacted by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The judge found that plans to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had issued. Currently, this success could be compromised by an secret arbitration panel accountable to exclusively the corporations bringing the case.

During August, a firm whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have no idea how much this could amount to. Who is representing it against the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK levied against him following the Russian aggression. He has previously filed a claim against another European state with similar intent, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Legal experts argue that the EU’s delay in utilising seized state funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that such things were not possible. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An adviser on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with scepticism.

That warning has come to pass. This year, oil and gas and mining firms have initiated a record number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to halt global warming. Corporations have to date won vast sums via ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP