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Can you perceive our system of government functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Legislation are enforced by the courts. End of story. Well, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, and the billionaires who own them, can sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to corporations registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to abandon its policy. It becomes hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The consequence? National sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the consent the Tories had approved. Today, this success faces being overturned by an offshore tribunal accountable to only the companies filing the suit.

During August, a firm whose ultimate owners are located in the tax haven lodged a claim versus the UK government. Last week a tribunal in the US capital was convened to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no idea how much this could amount to. Who is serving as its counsel against the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half state's yearly budget. Included in the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that such things were not possible. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter labelled campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and mining firms have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – official measures to stop global warming. Firms have so far won $114bn by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP