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Can you perceive our political system works? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. However, that’s how it used to work. No longer.

The Rise of Offshore Tribunals

Nowadays, overseas companies, along with the billionaires behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including enterprises headquartered in this country. They are open only to corporations registered abroad.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, even billions.

These sums are based not on tangible damages but funds the tribunal officials conclude the company might otherwise have made. The state could be forced to drop the legislation. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Running Rampant

Record numbers of disputes are being initiated, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? Sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by elected bodies is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – within trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The justice found that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the licence the former government had approved. Today, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the corporations bringing the case.

In August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in Washington DC 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 acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the high court validates it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it seems likely that he may employ the arbitration process to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, claiming $16bn: equivalent to half of nation's yearly budget. Part of the counsel on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that these events could not occur. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and resource corporations have initiated a record number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP