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How do you perceive our system of government operates? It could be along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. Well, that used to be how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, along with the oligarchs that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even businesses operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel rules that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but funds the panel members determine the company would perhaps have made. The state may have to abandon its policy. It will be deterred from enacting future policies in that area, for fear of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as corporations learn from each other, and private equity finance suits in return for a share of the settlements. The result? National sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by parliaments is that this stipulation has been inserted – without public consent, and frequently under conditions of total confidentiality – inside international trade agreements.

A Specific Instance: The Cumbrian Coalmine

Last year, activists won a great victory at the senior court. The judge determined that proposals to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government subsequently revoked the licence the previous administration had issued. Now, this legal outcome is under threat by an foreign court answering to no one but the entities petitioning it.

In August, a company whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in the US capital was established to consider the case.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. What legal team is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state enacts a policy, the high court validates it, then a foreign company challenges it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK imposed on him after the war in Ukraine. He has already filed a claim against a small nation with similar intent, seeking $16bn: half that government’s yearly income. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that such things wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” A consultant on this matter accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That prediction has come to pass. Recently, fossil fuel and mining firms have initiated a historic level of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP