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What is your understand our system of government operates? Maybe something like this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that’s how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Today, international firms, and the oligarchs who own them, can sue nation states for the policies they pass, at offshore tribunals made up of business advocates. These proceedings take place in secret. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums are based not on tangible damages but funds the tribunal officials conclude the company would perhaps have made. The administration might be compelled to rescind the measure. It will be hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The justice ruled that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the consent the previous administration had issued. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the companies bringing the case.

Last August, a firm whose ultimate owners are based in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in the United States was set up to consider the case.

This firm is suing the UK for the money it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a international entity challenges it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the sanctions the UK levied against him following the Russian aggression. He has already filed a claim against another European state for this reason, seeking a colossal sum: half that government’s yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these scenarios were not possible. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, declared: “The UK has signed trade deal upon trade deal and there has never been a case in the past.” An expert on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat is now a reality. In the current period, oil and gas and resource corporations have lodged a historic level of claims against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP