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How do you perceive our political system works? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. However, that was how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Today, overseas companies, and the billionaires that control them, can sue governments for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses based in this country. They are open only to corporations operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards are based not on tangible damages but funds the panel members decide the company would perhaps have made. The state might be compelled to drop the legislation. It will be deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a share of the awards. The outcome? Sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and often in a climate of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government subsequently revoked the licence the former government had approved. Today, this legal outcome could be compromised by an secret arbitration panel answering to only the companies petitioning it.

During August, a firm whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. Which individual is representing it challenging the UK administration? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case at present, but it seems likely that he will utilise the tribunal to contest the penalties the UK enacted against him following the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of state's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that such things were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this matter described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. This year, fossil fuel and mining firms have lodged a record number of cases against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to stop environmental catastrophe. Firms have thus far won vast sums via ISDS, of which oil majors have secured the majority. That represents the combined GDP