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Can you reckon our system of government operates? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the oligarchs behind them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including companies operating from this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but money the arbitrators determine the company could potentially have made. The administration could be forced to rescind the measure. It becomes discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations observe each other, and private equity fund legal actions in exchange for a cut of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by elected bodies is that this stipulation has been inserted – without public consent, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Instance: The UK Coal Mine

A year ago, activists won a great victory at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Now, this success is under threat by an offshore tribunal accountable to only the entities petitioning it.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is acting on its behalf challenging the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he may employ the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has already started suing a small nation with similar intent, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these events were not possible. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An expert on this issue accused activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That warning is now a reality. Recently, energy and mining firms have initiated a historic level of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have so far won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP