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What is your perceive our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. Well, that was how it operated in the past. No longer.

The Advent of Offshore Arbitration Panels

Today, foreign corporations, or the oligarchs that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open only to businesses registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, worried about facing litigation.

A System Running Rampant

Record numbers of legal actions are being initiated, as firms take cues from each other, and private equity finance suits for a share of a share of the settlements. The outcome? Sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by parliaments is that this provision has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The new government later cancelled the licence the previous administration had granted. Now, this success is under threat by an offshore tribunal answering to no one but the companies bringing the case.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to proceed. The public has little idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, demanding $16bn: an amount representing half state's yearly budget. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that such things could not occur. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this issue labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “once firms begin to understand the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has come to pass. Recently, oil and gas and extraction companies have filed a record number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to stop environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP