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Can you perceive our system of government works? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

Nowadays, international firms, and the oligarchs that control them, can sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. The door is open solely for entities registered abroad.

When a secret court determines that a government measure may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These awards constitute not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The state might be compelled to drop the legislation. It becomes hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by parliaments is that this stipulation has been inserted – without public consent, and often in an atmosphere of profound opacity – into trade treaties.

A Real-World Example: The UK Coal Mine

Last year, a conservation group won a great victory at the High Court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on climate commitments. The new government subsequently revoked the consent the previous administration had approved. Currently, this success could be compromised by an foreign court reporting to no one but the companies petitioning it.

During August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have little idea how much this might be. Which individual is representing it challenging the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation challenges it through an secretive private court, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK levied against him subsequent to the Russian aggression. He has filed a claim against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half nation's yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that such things could not occur. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An expert on this topic described campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has come to pass. In the current period, energy and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP