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Can you reckon our system of government works? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

Today, foreign corporations, along with the wealthy individuals who own them, can sue nation states for the regulations they pass, at private courts staffed by commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted solely for corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards are based not on actual losses but money the panel members conclude the company would perhaps have made. The government could be forced to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as firms observe each other, and investment funds finance suits in return for a share of the takings. The result? Democratic sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices made by elected bodies is that this clause has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coal Mine

Last year, activists secured a significant win at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The Labour government later cancelled the licence the previous administration had approved. Now, this success is under threat by an secret arbitration panel reporting to no one but the corporations filing the suit.

In August, a firm whose final controllers reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was set up to hear it.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. What legal team is representing it in opposition to the state? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has started suing Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Among the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that these events wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this matter accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat is now a reality. In the current period, oil and gas and mining firms have filed a historic level of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have thus far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP