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Can you reckon our system of government operates? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, or the billionaires behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals made up of business advocates. The cases are conducted behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. Access is granted exclusively to corporations registered abroad.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation are based not on real financial harm but money the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It is deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions made by elected bodies is that this provision has been written – without democratic mandate, and often in a climate of total confidentiality – inside international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, a conservation group secured a significant win at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no impact on climate commitments. The incoming administration then withdrew the consent the previous administration had approved. Now, this victory is under threat by an secret arbitration panel accountable to no one but the corporations filing the suit.

In August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the United States was established to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this might be. Which individual is acting on its behalf against the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a international entity disputes it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the tribunal to contest the restrictions the UK enacted against him following the Russian aggression. He has started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Among the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that these events could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this matter described campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “once firms grasp the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, energy and resource corporations have lodged a unprecedented number of cases against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP