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What is your perceive our system of government operates? Maybe similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, along with the billionaires behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses operating from this country. The door is open only to entities operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The government may have to rescind the measure. It becomes deterred from enacting future policies along the same lines, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and hedge funds finance suits in return for a portion of the takings. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions made by legislatures is that this stipulation has been incorporated – without public consent, and often in conditions of total confidentiality – inside international trade agreements.

A Real-World Example: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge found that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on national carbon targets. The incoming administration subsequently revoked the licence the former government had approved. Currently, this success could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

During August, a firm whose ultimate owners are based in the tax haven initiated proceedings against the UK government. Recently a tribunal in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this might be. Who is representing it challenging the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a foreign company challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK enacted against him after the war in Ukraine. He has already started suing Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these scenarios could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic accused critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That threat is now a reality. Recently, energy and resource corporations have lodged a historic level of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP