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Can you perceive our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is upheld by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, have the power to sue governments for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including enterprises based in this country. They are open solely for businesses based overseas.

If a tribunal finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums represent not actual losses but money the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It will be hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as corporations take cues from each other, and hedge funds fund legal actions in return for a share of the awards. The outcome? National sovereignty and democracy are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and often in an atmosphere of total confidentiality – inside international trade agreements.

A Real-World Instance: The UK Coalmine

A year ago, environmental campaigners won a great victory at the high court. The presiding officer found that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The Labour government then withdrew the consent the Tories had issued. Today, this success could be compromised by an secret arbitration panel reporting to exclusively the entities bringing the case.

In August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Recently a tribunal in the US capital was set up to hear it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The state passes a law, the high court validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” A consultant on this issue labelled activists of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That warning has come to pass. This year, oil and gas and extraction companies have filed a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP