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What is your perceive our political system works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. However, that’s how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

Today, international firms, along with the oligarchs who own them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but compensation the tribunal officials decide the company might otherwise have made. The state may have to drop the legislation. It will be deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The result? National sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices made by parliaments is that this provision has been written – without democratic mandate, and often in an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on climate commitments. The Labour government then withdrew the licence the Tories had issued. Now, this success could be compromised by an offshore tribunal accountable to exclusively the companies bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. The public has no idea how much this could amount to. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he may employ the tribunal to contest the restrictions the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, seeking $16bn: half that government’s yearly budget. Part of the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An adviser on this matter labelled critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That threat is now a reality. This year, energy and extraction companies have lodged a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop climate breakdown. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP