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Can you perceive our political system operates? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, are able to litigate against nation states for the regulations they pass, at private courts made up of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even enterprises based in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the arbitrators decide the company might otherwise have made. The government could be forced to drop the legislation. It is deterred from introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The outcome? National sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings enacted by elected bodies is that this provision has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – into trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge found that proposals to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The Labour government later cancelled the permission the former government had issued. Currently, this victory could be compromised by an foreign court accountable to only the companies filing the suit.

In August, a firm whose ultimate owners are based in the tax haven initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

This firm is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is representing it challenging the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he’ll use the tribunal to challenge the penalties the UK levied against him after the war in Ukraine. He has previously started suing a small nation on these grounds, demanding a colossal sum: equivalent to half of government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that such things were not possible. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An expert on this topic labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat is now a reality. Recently, energy and extraction companies have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to stop global warming. Companies have to date won $114bn through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP