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Can you reckon our political system operates? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, can sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted only to businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but compensation the tribunal officials determine the company might otherwise have made. The government might be compelled to drop the legislation. It will be deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The consequence? National sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices made by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of total confidentiality – within trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The Labour government later cancelled the permission the previous administration had issued. Now, this legal outcome could be compromised by an offshore tribunal accountable to only the entities petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was established to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no idea how much this could amount to. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the legal team on his side? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that such things could not occur. Previously, a government leader, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter accused critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by scepticism.

That warning has come to pass. This year, oil and gas and mining firms have lodged a historic level of claims against nations across the economic spectrum, challenging – similar to the UK mine – state efforts to prevent climate breakdown. Firms have to date won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP