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How do you reckon our political system functions? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, overseas companies, and the billionaires that control them, have the power to sue governments for the laws they pass, at private courts staffed by business advocates. The cases are conducted in secret. Differing from national judiciaries, these panels grant no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies based in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it can award damages of vast sums, even billions.

This compensation constitute not actual losses but funds the panel members determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from introducing similar legislation in that area, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The result? National sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under conditions of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the high court. The judge ruled that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The new government subsequently revoked the licence the Tories had issued. Currently, this legal outcome could be compromised by an secret arbitration panel answering to no one but the corporations bringing the case.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been permitted to go ahead. We have no idea how much this sum represents. Which individual is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK levied against him following the invasion of Ukraine. He has started suing another European state with similar intent, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Part of the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these scenarios were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That threat is now a reality. In the current period, energy and resource corporations have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP