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How do you reckon our system of government functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, along with the billionaires who own them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted solely for corporations registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

These sums are based not on real financial harm but funds the panel members determine the company could potentially have made. The government may have to drop the legislation. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? Sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by parliaments is that this clause has been written – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had approved. Today, this success could be compromised by an foreign court reporting to only the entities petitioning it.

In August, a firm whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is serving as its counsel challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has previously started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Among the counsel on his side? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

We were assured that these events were not possible. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” A consultant on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has now materialised. In the current period, energy and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the UK mine – government attempts to halt environmental catastrophe. Companies have so far won vast sums by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP