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Can you reckon our political system operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Today, overseas companies, and the wealthy individuals behind them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, including enterprises operating from this country. The door is open solely for entities based overseas.

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

These awards represent not tangible damages but compensation the arbitrators decide the company might otherwise have made. The government may have to rescind the measure. It becomes deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being brought, as corporations take cues from each other, and investment funds finance suits for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices enacted by parliaments is that this clause has been inserted – absent public approval, and often in a climate of profound opacity – inside international trade agreements.

A Concrete Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the High Court. The justice found that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the consent the Tories had approved. Today, this success could be compromised by an offshore tribunal answering to exclusively the companies bringing the case.

During August, a company whose final controllers are located in the tax haven initiated proceedings against the UK government. Last week a tribunal in the US capital was set up to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. We have little idea how much this might be. Who is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that state's yearly income. Among the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these events could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” A consultant on this matter accused critics of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Predictions that “once firms begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, energy and resource corporations have initiated a record number of suits against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to stop global warming. Corporations have to date won $114bn by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP