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Can you perceive our system of government operates? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

Today, foreign corporations, along with the oligarchs who own them, can sue governments for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are conducted in secret. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted solely for businesses based overseas.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums represent not actual losses but funds the tribunal officials determine the company might otherwise have made. The government may have to abandon its policy. It becomes deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies learn from each other, and private equity finance suits in return for a share of the takings. The result? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the choices enacted by parliaments is that this stipulation has been written – absent public approval, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The new government later cancelled the licence the Tories had issued. Now, this victory faces being overturned by an foreign court answering to only the companies petitioning it.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this might be. What legal team is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the high court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it appears probable that he’ll use the tribunal to contest the sanctions the UK imposed on him following the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Included in the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An adviser on this topic accused activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has now materialised. Recently, fossil fuel and mining firms have initiated a historic level of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP