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What is your reckon our political system works? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Well, that was how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals made up of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including companies operating from this country. The door is open exclusively to entities operating from foreign soil.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

This compensation constitute not real financial harm but money the tribunal officials conclude the company might otherwise have made. The government might be compelled to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? National sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions enacted by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under conditions of total confidentiality – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the senior court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration then withdrew the permission the Tories had issued. Today, this success is under threat by an offshore tribunal answering to only the companies petitioning it.

In August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it might have made if the mine had received permission to go ahead. We have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he’ll use the tribunal to contest the restrictions the UK imposed on him following the war in Ukraine. He has started suing Luxembourg with similar intent, claiming a colossal sum: an amount representing half state's yearly budget. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these events wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. This year, oil and gas and mining firms have initiated a record number of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP