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What is your perceive our system of government operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, along with the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at private courts made up of commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these bodies grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

This compensation are based not on actual losses but compensation the tribunal officials determine the company would perhaps have made. The government may have to rescind the measure. It is discouraged from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions made by parliaments is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that plans to dig the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had issued. Currently, this success is under threat by an secret arbitration panel reporting to exclusively the companies filing the suit.

In August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to commence operations. We have no idea how much this might be. Which individual is serving as its counsel challenging the state? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive arbitration panel, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him after the war in Ukraine. He has started suing a small nation with similar intent, demanding $16bn: an amount representing half state's annual revenue. Part of the lawyers on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this issue labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That warning is now a reality. Recently, energy and resource corporations have filed a record number of cases against nations rich and poor, challenging – similar to the UK mine – government attempts to prevent environmental catastrophe. Corporations have to date won vast sums through ISDS, of which oil majors have secured the majority. That represents the combined GDP