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Can you understand our system of government functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. However, that was how it used to work. Those days are over.

The Emergence of Offshore Tribunals

Nowadays, overseas companies, and the billionaires behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. The door is open solely for entities based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but money the tribunal officials conclude the company could potentially have made. The state may have to drop the legislation. It is deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A System Growing Exponentially

Record numbers of disputes are being brought, as corporations learn from each other, and hedge funds fund legal actions in return for a cut of the settlements. The result? Democratic sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions enacted by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Example: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The incoming administration later cancelled the permission the Tories had issued. Currently, this success faces being overturned by an foreign court accountable to exclusively the entities filing the suit.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is suing the UK for the profits it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case at present, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against another European state with similar intent, claiming $16bn: an amount representing half government’s annual revenue. Among the counsel on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this matter accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies begin to understand the power they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with scepticism.

That warning is now a reality. Recently, oil and gas and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP