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Can you perceive our political system operates? Maybe something like this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, and the billionaires that control them, can sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. The cases take place in secret. Differing from national judiciaries, these tribunals allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for corporations based overseas.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

This compensation constitute not actual losses but money the tribunal officials determine the company would perhaps have made. The administration might be compelled to abandon its policy. It will be deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings taken by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The judge ruled that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have no impact on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this victory faces being overturned by an foreign court reporting to only the corporations petitioning it.

Last August, a company whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already started suing another European state with similar intent, claiming $16bn: equivalent to half of government’s annual revenue. Among the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these scenarios could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this issue accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That warning is now a reality. In the current period, fossil fuel and mining firms have filed a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to stop global warming. Corporations have thus far won vast sums via ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP