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How do you perceive our system of government functions? It could be along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, and the billionaires who own them, can sue governments for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies based in this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it may order damages of hundreds of millions, running into billions.

These awards constitute not actual losses but money the tribunal officials conclude the company would perhaps have made. The state could be forced to rescind the measure. It will be deterred from enacting future policies in that area, due to the risk of facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The result? Sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the choices enacted by elected bodies is that this provision has been written – absent public approval, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The justice found that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The Labour government later cancelled the licence the former government had issued. Currently, this victory is under threat by an secret arbitration panel accountable to no one but the corporations petitioning it.

During August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim against the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been permitted to proceed. We have no idea how much this could amount to. What legal team is serving as its counsel against the state? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company contests it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Case

Concurrently that the court on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Among the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this issue labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. Recently, energy and mining firms have filed a historic level of suits against nations rich and poor, contesting – similar to the UK mine – government attempts to stop global warming. Firms have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP