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What is your perceive our system of government works? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, or the billionaires who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals composed of corporate lawyers. The cases take place in secret. Unlike our courts, these panels allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to entities registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation are based not on real financial harm but compensation the panel members decide the company might otherwise have made. The administration may have to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as corporations observe each other, and hedge funds fund legal actions in return for a portion of the awards. The result? Sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices enacted by elected bodies is that this clause has been inserted – absent public approval, and typically amid a climate of extreme secrecy – into international trade agreements.

A Real-World Example: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The judge determined that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the permission the former government had granted. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him after the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: half that nation's annual revenue. Included in the lawyers representing him there? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine arises 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 democratic administrations could be blocking the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that these scenarios were not possible. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to halt global warming. Companies have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP