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What is your understand our system of government works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is upheld by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Rise of Secret Tribunals

Today, foreign corporations, or the wealthy individuals that control them, can sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies based in this country. Access is granted solely for businesses based overseas.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums represent not tangible damages but funds the panel members conclude the company would perhaps have made. The state might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and democracy are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings taken by elected bodies is that this clause has been incorporated – without democratic mandate, and often in a climate of profound opacity – inside trade treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The justice ruled that proposals to open the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the permission the former government had granted. Currently, this legal outcome faces being overturned by an offshore tribunal answering to only the companies filing the suit.

In August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the revenue it might have made if the mine had received permission to commence operations. We have no idea how much this might be. Who is acting on its behalf against the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the panel on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK levied against him after the Russian aggression. He has filed a claim against a small nation with similar intent, seeking a colossal sum: an amount representing half government’s yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that such things could not occur. Previously, a former prime minister, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning is now a reality. In the current period, oil and gas and mining firms have initiated a record number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies 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