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How do you understand our political system works? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, international firms, along with the billionaires behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these bodies grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open only to corporations registered abroad.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation constitute not real financial harm but money the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It will be discouraged from passing future laws in that area, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as corporations learn from each other, and private equity finance suits in return for a portion of the awards. The consequence? National sovereignty and popular rule are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Specific Case: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice determined that schemes to open the first deep coalmine 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 zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had granted. Today, this victory could be compromised by an secret arbitration panel accountable to exclusively the entities bringing the case.

Last August, a firm whose final controllers reside in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in Washington DC was set up to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. We have no clear indication how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him following the war in Ukraine. He has initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: half that nation's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that such things wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this matter described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That prediction is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP