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How do you reckon our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, international firms, or the oligarchs behind them, can sue governments for the policies they pass, at private courts made up of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but money the panel members decide the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions made by legislatures is that this provision has been written – without public consent, and often in a climate of profound opacity – into trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the consent the Tories had granted. Today, this success could be compromised by an foreign court answering to no one but the companies bringing the case.

Last August, a company whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

This firm is suing the UK for the money it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf against the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court validates it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has already started suing Luxembourg for this reason, seeking a colossal sum: equivalent to half of government’s yearly budget. Included in the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these events could not occur. In 2014, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this issue labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has now materialised. This year, fossil fuel and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have to date won $114bn by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP