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What is your perceive our system of government works? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including companies based in this country. Access is granted exclusively to businesses registered abroad.

When a secret court finds that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but money the tribunal officials determine the company could potentially have made. The state could be forced to rescind the measure. It will be hesitant to enacting future policies along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as companies observe each other, and private equity finance suits in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices enacted by legislatures is that this clause has been inserted – without public consent, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Case: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Now, this victory faces being overturned by an secret arbitration panel accountable to exclusively the entities bringing the case.

Last August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. We have little idea how much this sum represents. What legal team is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against another European state for this reason, claiming a colossal sum: half that government’s annual revenue. Among the counsel acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Costs

The public was told that such things were not possible. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this topic accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That prediction is now a reality. This year, fossil fuel and extraction companies have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP