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How do you reckon our system of government works? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, or the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open exclusively to entities based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but funds the arbitrators conclude the company might otherwise have made. The government may have to drop the legislation. It is hesitant to passing future laws along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as firms learn from each other, and hedge funds finance suits in exchange for a portion of the takings. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices made by legislatures is that this stipulation has been inserted – without public consent, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The judge found that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the licence the previous administration had granted. Today, this legal outcome faces being overturned by an secret arbitration panel answering to only the corporations bringing the case.

Last August, a firm whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this sum represents. What legal team is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The administration enacts a policy, the domestic court validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the panel on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK levied against him following the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding $16bn: an amount representing half government’s annual revenue. Part of the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that these events could not occur. Previously, a government leader, championing the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this matter described campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies begin to understand the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That threat has come to pass. This year, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, opposing – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP