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Can you understand our system of government functions? It could be similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

In the modern era, international firms, and the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at private courts composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These sums represent not real financial harm but compensation the arbitrators determine the company could potentially have made. The administration may have to drop the legislation. It will be discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings taken by parliaments is that this stipulation has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on climate commitments. The Labour government later cancelled the permission the previous administration had issued. Now, this victory could be compromised by an offshore tribunal accountable to only the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. What legal team is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it seems likely that he may employ the arbitration process to fight the penalties the UK enacted against him subsequent to the Russian aggression. He has previously initiated proceedings against another European state with similar intent, claiming $16bn: equivalent to half of state's yearly income. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Costs

Politicians promised that these events were not possible. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this issue accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning is now a reality. This year, oil and gas and mining firms have filed a historic level of cases against nations rich and poor, opposing – similar to the UK mine – state efforts to stop climate breakdown. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained the majority. That represents the combined GDP