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What is your reckon our system of government works? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, along with the wealthy individuals that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel rules that a government measure could harm the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These sums represent not real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration may have to rescind the measure. It will be discouraged from passing future laws of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of cases are being filed, as corporations learn from each other, and investment funds fund legal actions in exchange for a cut of the takings. The outcome? Sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings taken by elected bodies is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Now, this legal outcome faces being overturned by an foreign court accountable to exclusively the entities bringing the case.

In August, a firm whose final controllers are based in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration enacts a policy, the domestic court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case so far, but it is highly possible that he may employ the tribunal to challenge the penalties the UK levied against him following the Russian aggression. He has already started suing a small nation on these grounds, demanding a colossal sum: equivalent to half of nation's yearly budget. Included in the legal team acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that these scenarios were not possible. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this topic described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations start to realise the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That warning has now materialised. In the current period, energy and mining firms have initiated a historic level of suits against nations rich and poor, contesting – similar to the UK mine – state efforts to stop climate breakdown. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP