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How do you reckon our system of government functions? Maybe similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that was how it used to work. Those days are over.

The Rise of Offshore Courts

Nowadays, overseas companies, and the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at private courts made up of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses based in this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal rules that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company could potentially have made. The state could be forced to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being brought, as corporations observe each other, and investment funds fund legal actions in return for a cut of the awards. The consequence? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The UK Coal Mine

Last year, activists won a great victory at the senior court. The judge determined that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the permission the former government had granted. Today, this victory is under threat by an secret arbitration panel accountable to exclusively the corporations petitioning it.

Last August, a company whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has little idea how much this sum represents. Who is representing it against the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a foreign company contests it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the tribunal to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: half that nation's yearly budget. Part of the legal team on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An expert on this issue accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “once firms grasp the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, energy and mining firms have lodged a record number of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP