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Can you reckon our system of government works? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, foreign corporations, and the billionaires that control them, have the power to sue governments for the regulations they pass, at private courts made up of business advocates. The cases are conducted in secret. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even companies headquartered in this country. The door is open solely for corporations based overseas.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The administration might be compelled to rescind the measure. It will be discouraged from passing future laws along the same lines, due to the risk of being sued.

A System Growing Exponentially

Historically high figures of cases are being brought, as corporations learn from each other, and private equity finance suits for a share of a share of the settlements. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings taken by elected bodies is that this provision has been inserted – without public consent, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer found that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the previous administration had approved. Currently, this success could be compromised by an foreign court answering to no one but the entities petitioning it.

Last August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the United States was convened to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The state makes a decision, the domestic court validates it, then a foreign company disputes it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking a colossal sum: an amount representing half government’s annual revenue. Among the legal team acting for him in that case? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that such things could not occur. Previously, a senior politician, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this issue described critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Predictions that “when companies start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That warning has come to pass. This year, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to prevent climate breakdown. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP