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Can you understand our political system operates? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that was how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

Today, overseas companies, and the wealthy individuals who own them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not tangible damages but money the tribunal officials conclude the company could potentially have made. The state may have to abandon its policy. It becomes deterred from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being filed, as firms learn from each other, and hedge funds finance suits for a share of a cut of the takings. The result? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings made by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of total confidentiality – within international trade agreements.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the previous administration had issued. Now, this success is under threat by an offshore tribunal answering to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the United States was set up to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Who is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he’ll use the tribunal to fight the sanctions the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in 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 procrastination in utilising seized Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these events were not possible. In 2014, a senior politician, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An expert on this issue described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “once firms grasp the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That threat is now a reality. In the current period, oil and gas and resource corporations have lodged a historic level of claims against nations rich and poor, opposing – similar to the UK mine – official measures to halt global warming. Corporations have to date won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP