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How do you perceive our political system functions? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, and the billionaires that control them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, including businesses headquartered in this country. The door is open only to businesses registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it can award damages of vast sums, even billions.

This compensation are based not on tangible damages but funds the panel members decide the company could potentially have made. The state might be compelled to rescind the measure. It becomes deterred from passing future laws along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in return for a cut of the awards. The outcome? National sovereignty and popular rule are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The justice found that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to no one but the companies petitioning it.

During August, a firm whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was convened to hear it.

The claimant is suing the UK for the money it might have made if the mine had been allowed to go ahead. The public has little idea how much this sum represents. Who is representing it against the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the domestic court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has filed a claim against a small nation with similar intent, seeking $16bn: equivalent to half of government’s yearly income. Among the legal team 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 leveraging immobilised state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these scenarios could not occur. Years ago, a government leader, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” A consultant on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations grasp the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, energy and extraction companies have filed a record number of cases against nations rich and poor, opposing – like the example of the UK mine – official measures to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP