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Can you understand our system of government works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

In the modern era, overseas companies, and the oligarchs behind them, have the power to sue governments for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums constitute not actual losses but money the tribunal officials conclude the company could potentially have made. The government might be compelled to rescind the measure. It is discouraged from introducing similar legislation in that area, for fear of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as corporations observe each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The outcome? Sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the choices made by parliaments is that this provision has been inserted – without democratic mandate, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Case: The UK Coalmine

Last year, activists won a great victory at the High Court. The justice found that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the consent the Tories had approved. Now, this legal outcome could be compromised by an foreign court reporting to no one but the corporations bringing the case.

Last August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have little idea how much this sum represents. Which individual is representing it in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company disputes 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 tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he’ll use the tribunal to fight the restrictions the UK imposed on him after the war in Ukraine. He has initiated proceedings against another European state with similar intent, demanding $16bn: half that nation's yearly income. Included in the counsel on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events were not possible. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this topic described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That threat has come to pass. Recently, fossil fuel and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That equates to the combined GDP