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What is your reckon our system of government functions? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. You or I cannot take a case to them, just as our government, or even enterprises based in this country. They are open only to corporations based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These sums constitute not tangible damages but compensation the arbitrators conclude the company might otherwise have made. The state might be compelled to drop the legislation. It is deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as corporations learn from each other, and private equity bankroll lawsuits in return for a cut of the awards. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – absent public approval, and often in conditions of profound opacity – within trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the permission the former government had issued. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the companies bringing the case.

In August, a company whose final controllers reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this might be. Who is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The state passes a law, the national judiciary validates it, then a foreign company contests it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, claiming $16bn: an amount representing half state's annual revenue. Part of the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen state funds as security for its financial support package arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this topic accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That prediction is now a reality. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations rich and poor, opposing – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP