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What is your perceive our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Rise of Offshore Arbitration Panels

Today, international firms, and the billionaires who own them, can sue nation states for the laws they pass, at secret arbitration panels staffed by business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. They are open exclusively to corporations registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it may order damages of vast sums, even billions.

This compensation represent not real financial harm but money the arbitrators decide the company might otherwise have made. The administration could be forced to rescind the measure. It is hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices taken by parliaments is that this stipulation has been written – without public consent, and often in conditions of total confidentiality – into international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The justice determined that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The Labour government then withdrew the consent the previous administration had approved. Today, this success faces being overturned by an foreign court reporting to no one but the companies filing the suit.

In August, a company whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. The public has no idea how much this might be. Who is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary supports it, then a international entity disputes it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Challenge

Simultaneously that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case at present, but it appears probable that he may employ the arbitration process to fight the penalties the UK enacted against him after the Russian aggression. He has filed a claim against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Among the lawyers representing him there? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events were not possible. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP