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What is your reckon our system of government functions? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. However, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, and the oligarchs behind them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for businesses registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

This compensation represent not actual losses but money the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It is deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as corporations observe each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The outcome? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings taken by elected bodies is that this stipulation has been written – without public consent, and often in a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The judge determined that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the licence the Tories had granted. Currently, this victory is under threat by an secret arbitration panel answering to only the entities filing the suit.

During August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been permitted to go ahead. Citizens have no clear indication how much this sum represents. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the high court supports it, then a international entity challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it seems likely that he’ll use the arbitration process to contest the restrictions the UK imposed on him following the Russian aggression. He has initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the legal team on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that such things were not possible. In 2014, 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.” An expert on this topic labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That threat has come to pass. Recently, energy and resource corporations have filed a historic level of cases against nations rich and poor, contesting – similar to the UK mine – state efforts to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP