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How do you perceive our system of government works? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. However, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, international firms, or the wealthy individuals who own them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, just as our government, including enterprises headquartered in this country. Access is granted solely for corporations based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of vast sums, potentially billions.

These sums are based not on tangible damages but money the tribunal officials determine the company might otherwise have made. The administration could be forced to rescind the measure. It is discouraged from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being initiated, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions taken by elected bodies is that this clause has been incorporated – absent public approval, and typically amid conditions of profound opacity – inside international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer found that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the former government had issued. Now, this legal outcome is under threat by an secret arbitration panel answering to no one but the corporations bringing the case.

During August, a company whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Which individual is serving as its counsel against the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has started suing Luxembourg on these grounds, seeking $16bn: half that nation's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this topic accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning has now materialised. Recently, oil and gas and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to prevent environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP