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What is your understand our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. End of story. However, that used to be how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but funds the arbitrators decide the company could potentially have made. The government could be forced to rescind the measure. It will be discouraged from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies observe each other, and private equity fund legal actions for a share of a share of the settlements. The outcome? Democratic sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the decisions enacted by legislatures is that this clause has been written – absent public approval, and frequently under a climate of total confidentiality – within international trade agreements.

A Specific Case: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on climate commitments. The new government then withdrew the consent the former government had granted. Today, this success could be compromised by an foreign court accountable to exclusively the entities filing the suit.

During August, a company whose beneficial owners are located in the tax haven lodged a claim against the UK government. The previous week a tribunal in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. We have little idea how much this sum represents. Who is representing it challenging the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the high court supports it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it seems likely that he will utilise the tribunal to contest the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming a colossal sum: an amount representing half state's yearly income. Among the lawyers representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “once firms grasp the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. Recently, oil and gas and mining firms have initiated a historic level of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to halt global warming. Companies have so far won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP