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How do you understand our system of government operates? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, international firms, and the oligarchs who own them, can sue elected administrations for the policies they pass, at private courts composed of business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. They are open exclusively to corporations based overseas.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

These awards are based not on real financial harm but compensation the tribunal officials conclude the company could potentially have made. The administration may have to drop the legislation. It is deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being brought, as corporations observe each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The result? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices taken by elected bodies is that this stipulation has been written – without democratic mandate, and often in a climate of total confidentiality – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge determined that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Now, this legal outcome faces being overturned by an secret arbitration panel reporting to only the corporations filing the suit.

During August, a firm whose final controllers are located in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is representing it against the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government passes a law, the domestic court validates it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it is highly possible that he’ll use the tribunal to contest the penalties the UK enacted against him following the Russian aggression. He has already filed a claim against another European state on these grounds, demanding $16bn: half that state's yearly income. Among the legal team representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that such things wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An expert on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. In the current period, energy and mining firms have initiated a historic level of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP