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How do you understand our political system works? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is secured, the bills become law. The law are enforced by the courts. End of story. Well, that was how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, and the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes take place behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises based in this country. The door is open only to corporations operating from foreign soil.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but compensation the panel members determine the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from enacting future policies in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies observe each other, and investment funds fund legal actions in return for a portion of the takings. The outcome? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices taken by legislatures is that this stipulation has been incorporated – without public consent, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge found that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The new government later cancelled the licence the previous administration had issued. Currently, this victory is under threat by an secret arbitration panel reporting to exclusively the corporations petitioning it.

Last August, a firm whose ultimate owners reside in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have no idea how much this might be. What legal team is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company challenges it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him following the war in Ukraine. He has already started suing a small nation on these grounds, demanding $16bn: an amount representing half government’s annual revenue. Included in the counsel representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that these events could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this topic labelled activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies begin to understand the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That warning is now a reality. In the current period, oil and gas and extraction companies have filed a historic level of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to prevent global warming. Corporations have so far won vast sums via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP