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What is your reckon our system of government operates? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including companies based in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.

These awards represent not actual losses but funds the arbitrators determine the company might otherwise have made. The administration could be forced to drop the legislation. It will be discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The consequence? Democratic sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the choices enacted by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Case: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the senior court. The justice found that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the licence the former government had approved. Now, this victory is under threat by an foreign court reporting to no one but the entities bringing the case.

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

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. We have little idea how much this might be. What legal team is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the arbitration process to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, claiming $16bn: an amount representing half state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen Russian assets as security for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these events could not occur. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “once firms start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That threat is now a reality. In the current period, fossil fuel and extraction companies have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to stop climate breakdown. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP