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How do you understand our political system functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that was how it once functioned. No longer.

The Advent of Offshore Tribunals

In the modern era, overseas companies, and the oligarchs behind them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for entities registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These sums constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The administration could be forced to abandon its policy. It becomes deterred from enacting future policies along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations observe each other, and private equity finance suits in exchange for a cut of the awards. The consequence? National sovereignty and democratic governance are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions made by legislatures is that this clause has been incorporated – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, activists won a great victory at the senior court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The new government then withdrew the consent the previous administration had granted. Now, this victory could be compromised by an secret arbitration panel reporting to exclusively the entities filing the suit.

During August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

The company is suing the UK for the money it could have earned if the mine had received permission to proceed. The public has no idea how much this might be. Who is representing it challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already started suing Luxembourg on these grounds, claiming $16bn: an amount representing half nation's yearly budget. Among the legal team representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that such things could not occur. Previously, a senior politician, championing the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this issue labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “when companies grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That prediction is now a reality. In the current period, fossil fuel and mining firms have filed a record number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have thus far won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP