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What is your reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, and the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these tribunals provide no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. They are open solely for entities based overseas.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

These sums represent not tangible damages but compensation the arbitrators decide the company might otherwise have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, worried about facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being brought, as firms take cues from each other, and investment funds finance suits for a share of a cut of the settlements. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions enacted by elected bodies is that this clause has been written – without public consent, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge ruled that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the consent the former government had granted. Currently, this legal outcome is under threat by an secret arbitration panel reporting to only the corporations bringing the case.

In August, a company whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have little idea how much this sum represents. Who is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has started suing another European state on these grounds, claiming $16bn: half that government’s annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An expert on this topic described activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That threat has now materialised. This year, fossil fuel and mining firms have initiated a unprecedented number of cases against nations rich and poor, challenging – like the example of the UK mine – government attempts to prevent environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have secured $84bn. That represents the combined GDP