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How do you perceive our system of government functions? Maybe similar to this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals who own them, can sue governments for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including enterprises headquartered in this country. The door is open only to corporations based overseas.

If a tribunal rules that a law or policy might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but funds the tribunal officials conclude the company would perhaps have made. The administration could be forced to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions taken by parliaments is that this clause has been inserted – absent public approval, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer found that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the consent the former government had issued. Today, this victory could be compromised by an foreign court answering to only the entities petitioning it.

Last August, a firm whose final controllers are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in Washington DC was convened to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has already started suing a small nation with similar intent, seeking $16bn: equivalent to half of nation's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this issue described campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message was crafted 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 shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. This year, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have to date won $114bn through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP