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What is your perceive our political system works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. The law is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of business advocates. Such disputes are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. They are open exclusively to businesses operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being initiated, as corporations learn from each other, and hedge funds finance suits in exchange for a portion of the awards. The result? Sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions enacted by legislatures is that this clause has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Real-World Instance: The UK Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The presiding officer found that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had issued. Today, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the companies petitioning it.

During August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was set up to hear it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case so far, but it is highly possible that he may employ the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against another European state with similar intent, claiming $16bn: half that nation's annual revenue. Included in the counsel on his side? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these events were not possible. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this topic described campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and extraction companies have lodged a historic level of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to halt climate breakdown. Firms have so far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP