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Can you understand our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires 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. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to corporations based overseas.

When a secret court determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums represent not tangible damages but compensation the arbitrators conclude the company might otherwise have made. The administration could be forced to rescind the measure. It becomes discouraged from introducing similar legislation 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 firms learn from each other, and investment funds bankroll lawsuits in exchange for a share of the awards. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the decisions made by elected bodies is that this stipulation has been written – without public consent, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the high court. The justice determined that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government subsequently revoked the permission the Tories had granted. Currently, this legal outcome is under threat by an offshore tribunal reporting to only the entities filing the suit.

Last August, a company whose final controllers are based in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court validates it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it appears probable that he may employ the arbitration process to challenge the restrictions the UK levied against him following the Russian aggression. He has previously filed a claim against Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s yearly income. Part of the counsel representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that such things were not possible. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this issue described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms grasp the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP