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Can you understand our system of government functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the billionaires that control them, have the power to sue nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, including companies based in this country. They are open solely for entities operating from foreign soil.

When a secret court finds that a government measure could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

This compensation represent not actual losses but funds the tribunal officials determine the company could potentially have made. The administration may have to rescind the measure. It will be hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds finance suits in exchange for a portion of the awards. The outcome? Sovereignty and popular rule are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions made by legislatures is that this stipulation has been written – without democratic mandate, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the high court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have zero effect on climate commitments. The new government later cancelled the permission the former government had issued. Today, this legal outcome could be compromised by an foreign court accountable to exclusively the companies bringing the case.

In August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was set up to consider the case.

This firm is suing the UK for the money it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. Who is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK levied against him after the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming sixteen billion dollars: equivalent to half of state's annual revenue. Included in the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

The public was told that these scenarios could not occur. Previously, a senior politician, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement upon trade deal and there has not been a issue in the past.” An adviser on this issue described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. Recently, fossil fuel and extraction companies have lodged a record number of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP