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What is your reckon our system of government functions? Maybe similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. Well, that was how it used to work. No longer.

The Advent of Offshore Courts

Nowadays, international firms, and the billionaires behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including businesses operating from this country. The door is open only to corporations based overseas.

When a secret court rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards are based not on real financial harm but compensation the arbitrators conclude the company could potentially have made. The administration could be forced to rescind the measure. It is discouraged from enacting future policies of a similar nature, worried about being sued.

A System Running Rampant

Record numbers of legal actions are being initiated, as companies observe each other, and investment funds finance suits in exchange for a share of the settlements. The outcome? Democratic sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Real-World Instance: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the senior court. The judge found that plans to open the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration then withdrew the consent the previous administration had approved. Now, this success is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a corporate entity whose final controllers reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was established to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it challenging the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the domestic court validates it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has previously started suing a small nation for this reason, demanding $16bn: half that state's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these scenarios were not possible. Previously, a government leader, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this issue described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations grasp the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That threat is now a reality. Recently, energy and mining firms have initiated a historic level of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP