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Can you reckon our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. However, that was how it operated in the past. No longer.

The Advent of Offshore Arbitration Panels

Today, international firms, and the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. They are open only to corporations based overseas.

When a secret court finds that a government measure may compromise the corporation’s anticipated profits, it has the power to grant compensation of vast sums, running into billions.

These sums are based not on tangible damages but money the tribunal officials decide the company could potentially have made. The administration could be forced to drop the legislation. It is hesitant to passing future laws of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and investment funds fund legal actions in exchange for a share of the takings. The outcome? Democratic sovereignty and popular rule are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices taken by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – within international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the High Court. The justice determined that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the permission the previous administration had approved. Now, this victory could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

In August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has little idea how much this sum represents. What legal team is acting on its behalf in opposition to the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it appears probable that he’ll use the tribunal to challenge the penalties the UK enacted against him after the Russian aggression. He has previously filed a claim against a small nation for this reason, demanding sixteen billion dollars: half that state's yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this issue described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms start to realise the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. In the current period, oil and gas and mining firms have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP