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What is your perceive our system of government functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, just as our government, including businesses operating from this country. The door is open only to businesses registered abroad.

When a secret court rules that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions, even billions.

This compensation are based not on tangible damages but funds the panel members decide the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a cut of the awards. The result? Democratic sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions taken by parliaments is that this stipulation has been written – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice determined that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government later cancelled the consent the Tories had granted. Now, this success could be compromised by an offshore tribunal accountable to only the corporations bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the US capital was established to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary supports it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has previously started suing Luxembourg with similar intent, demanding a colossal sum: equivalent to half of nation's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this issue accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear such legal actions. Predictions that “once firms grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were met with widespread derision.

That warning has come to pass. This year, fossil fuel and mining firms have filed a unprecedented number of cases against nations rich and poor, challenging – similar to the UK mine – state efforts to halt climate breakdown. Companies have to date won $114bn via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP