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Can you understand our system of government operates? Perhaps something like this. Citizens choose 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 was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, along with the oligarchs behind them, have the power to sue governments for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises based in this country. They are open exclusively to entities registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These sums represent not tangible damages but money the panel members decide the company might otherwise have made. The state could be forced to drop the legislation. It is discouraged from enacting future policies in that area, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The consequence? Sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and often in conditions of extreme secrecy – into trade treaties.

A Real-World Example: The UK Coalmine

A year ago, activists won a great victory at the high court. The judge found that schemes to dig the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had granted. Now, this victory is under threat by an offshore tribunal accountable to only the corporations filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

The company is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has started suing a small nation for this reason, demanding a colossal sum: equivalent to half of nation's yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that these events could not occur. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with scepticism.

That warning has come to pass. Recently, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP