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What is your reckon our system of government operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises operating from this country. They are open only to businesses operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but funds the tribunal officials conclude the company would perhaps have made. The administration might be compelled to rescind the measure. It will be discouraged from passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as firms observe each other, and private equity fund legal actions for a share of a cut of the takings. The outcome? Sovereignty and democracy are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the permission the previous administration had issued. Currently, this legal outcome faces being overturned by an offshore tribunal answering to no one but the corporations petitioning it.

During August, a firm whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the United States was set up to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. The public has no clear indication how much this might be. What legal team is acting on its behalf challenging the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The administration makes a decision, the national judiciary validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he may employ the tribunal to challenge the penalties the UK imposed on him after the war in Ukraine. He has previously started suing another European state on these grounds, seeking $16bn: equivalent to half of state's yearly income. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

The public was told that such things could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this issue described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “once firms begin to understand the influence they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by widespread derision.

That threat has come to pass. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, contesting – similar to the UK mine – government attempts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP