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What is your understand our system of government works? Perhaps similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open only to businesses operating from foreign soil.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums represent not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The government could be forced to abandon its policy. It will be deterred from passing future laws in that area, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations learn from each other, and private equity fund legal actions for a share of a cut of the awards. The consequence? National sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by elected bodies is that this clause has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge ruled that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The new government subsequently revoked the licence the previous administration had granted. Now, this legal outcome faces being overturned by an secret arbitration panel reporting to only the entities bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has little idea how much this might be. Who is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him after the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming a colossal sum: half that state's yearly budget. Part of the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these events were not possible. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this matter described campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning has come to pass. Recently, fossil fuel and resource corporations have lodged a historic level of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – government attempts to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP