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Can you perceive our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that was how it used to work. No longer.

The Advent of Offshore Tribunals

Nowadays, overseas companies, along with the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases take place in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including businesses based in this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it can award compensation of vast sums, even billions.

These sums constitute not tangible damages but money the panel members conclude the company would perhaps have made. The government could be forced to rescind the measure. It becomes deterred from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as firms learn from each other, and hedge funds finance suits in exchange for a cut of the takings. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions enacted by elected bodies is that this clause has been written – without democratic mandate, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Instance: The UK Coal Mine

A year ago, a conservation group won a great victory at the high court. The presiding officer found that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Today, this success is under threat by an secret arbitration panel reporting to no one but the entities bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in Washington DC was established to consider the case.

The company is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him after the war in Ukraine. He has already started suing a small nation for this reason, seeking a colossal sum: equivalent to half of state's yearly income. Included in the legal team on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that these events wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this matter described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That threat is now a reality. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to halt global warming. Companies have to date won vast sums by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP