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What is your perceive our system of government operates? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, or the billionaires who own them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including companies operating from this country. Access is granted only to entities based overseas.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These awards represent not tangible damages but money the tribunal officials determine the company might otherwise have made. The state might be compelled to rescind the measure. It becomes discouraged from enacting future policies along the same lines, worried about facing litigation.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The consequence? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions enacted by legislatures is that this stipulation has been written – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The judge ruled that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The new government then withdrew the permission the former government had granted. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the companies filing the suit.

In August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The government passes a law, the domestic court validates it, then a international entity challenges it through an secretive private court, and a elected official represents its behalf.

The Russian Case

On the same day that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the restrictions the UK levied against him after the invasion of Ukraine. He has filed a claim against another European state with similar intent, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Among the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these events wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, stated: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “as corporations start to realise the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning is now a reality. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have so far won vast sums via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP