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What is your understand our political system functions? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, and the oligarchs who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted exclusively to entities based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums are based not on tangible damages but funds the arbitrators determine the company could potentially have made. The state might be compelled to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The consequence? Sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the decisions taken by legislatures is that this clause has been written – without public consent, and often in a climate of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice determined that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the licence the Tories had approved. Currently, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations bringing the case.

Last August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The claimant is suing the UK for the money it might have made if the mine had been allowed to commence operations. The public has little idea how much this sum represents. Who is representing it in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and resource corporations have initiated a record number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Corporations have so far won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP