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How do you perceive our system of government functions? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, overseas companies, along with the billionaires behind them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open solely for corporations registered abroad.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These awards represent not tangible damages but compensation the tribunal officials determine the company might otherwise have made. The government may have to abandon its policy. It is hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The result? Democratic sovereignty and democracy are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – without public consent, and often in a climate of profound opacity – inside international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists secured a significant win at the High Court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government later cancelled the consent the Tories had approved. Today, this success is under threat by an secret arbitration panel accountable to exclusively the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Last week a tribunal in Washington DC was set up to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no clear indication how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it seems likely that he may employ the tribunal to fight the penalties the UK imposed on him following the war in Ukraine. He has previously started suing another European state on these grounds, claiming $16bn: equivalent to half of state's annual revenue. Among the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue accused critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That prediction has come to pass. In the current period, energy and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That represents the combined GDP