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What is your perceive our system of government functions? It could be something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, have the power to sue governments for the laws they pass, at offshore tribunals made up of business advocates. Such disputes take place in secret. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even companies based in this country. Access is granted only to entities registered abroad.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards represent not actual losses but money the panel members determine the company would perhaps have made. The government could be forced to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices taken by parliaments is that this provision has been incorporated – without democratic mandate, and often in conditions of profound opacity – inside international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge ruled that proposals to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have no impact on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Now, this legal outcome is under threat by an foreign court accountable to exclusively the entities petitioning it.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission to go ahead. Citizens have no idea how much this might be. Who is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the high court validates it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK enacted against him after the Russian aggression. He has filed a claim against Luxembourg on these grounds, demanding a colossal sum: half that government’s yearly income. Included in the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in using frozen state funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this matter accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat has now materialised. Recently, oil and gas and mining firms have lodged a historic level of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP