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What is your understand our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. That's it. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals behind them, can sue nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for entities registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums represent not real financial harm but money the tribunal officials determine the company would perhaps have made. The state might be compelled to drop the legislation. It is deterred from passing future laws along the same lines, worried about facing litigation.

A Mechanism Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and hedge funds finance suits in exchange for a cut of the settlements. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under a climate of profound opacity – inside trade treaties.

A Specific Example: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the former government had approved. Currently, this victory could be compromised by an secret arbitration panel reporting to only the companies filing the suit.

In August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Who is representing it challenging the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he may employ the tribunal to challenge the penalties the UK imposed on him following the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, claiming a colossal sum: an amount representing half nation's annual revenue. Among the lawyers on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

We were assured that these scenarios could not occur. Years ago, a former prime minister, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That prediction has now materialised. In the current period, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Firms have thus far won vast sums by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP