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What is your understand our system of government operates? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, or the oligarchs behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted in secret. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including companies headquartered in this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it may order damages of vast sums, even billions.

These sums represent not actual losses but compensation the arbitrators conclude the company might otherwise have made. The administration could be forced to drop the legislation. It becomes discouraged from passing future laws of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The consequence? Sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by legislatures is that this provision has been written – absent public approval, and frequently under a climate of profound opacity – within international trade agreements.

A Real-World Instance: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on climate commitments. The incoming administration then withdrew the consent the former government had issued. Today, this success faces being overturned by an foreign court answering to no one but the companies petitioning it.

Last August, a company whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has little idea how much this sum represents. Who is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration passes a law, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he may employ the arbitration process to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this topic accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That threat has now materialised. In the current period, oil and gas and extraction companies have lodged a record number of claims against nations across the economic spectrum, opposing – similar to the UK mine – official measures to stop environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP