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Can you reckon our system of government operates? Perhaps something like this. We elect MPs. They vote on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. End of story. Well, that was how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires that control them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these panels provide no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for entities based overseas.

When a secret court determines that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

This compensation constitute not actual losses but funds the tribunal officials determine the company could potentially have made. The administration could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being filed, as companies observe each other, and investment funds finance suits in exchange for a portion of the takings. The result? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings taken by elected bodies is that this stipulation has been written – absent public approval, and typically amid an atmosphere of profound opacity – inside international trade agreements.

A Specific Example: The UK Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge found that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the licence the Tories had granted. Currently, this success is under threat by an secret arbitration panel accountable to exclusively the entities petitioning it.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this might be. What legal team is representing it challenging the British government? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him after the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Among the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that these events could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Predictions that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That threat is now a reality. In the current period, oil and gas and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop global warming. Firms have to date won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP