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Can you understand our system of government works? It could be something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. End of story. However, that’s how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s anticipated profits, it can award damages of vast sums, even billions.

These sums represent not actual losses but money the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as firms take cues from each other, and private equity finance suits in return for a cut of the takings. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices enacted by legislatures is that this provision has been inserted – absent public approval, and often in a climate of extreme secrecy – inside international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the consent the previous administration had granted. Today, this success could be compromised by an secret arbitration panel answering to only the companies filing the suit.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in Washington DC was established to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Included in the counsel on his side? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

The public was told that these events were not possible. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this matter accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to prevent global warming. Companies have so far won $114bn by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP