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Can you perceive our political system functions? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, overseas companies, or the oligarchs behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open exclusively to entities operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company might otherwise have made. The government could be forced to abandon its policy. It will be hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices enacted by elected bodies is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – inside trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, activists won a great victory at the High Court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the consent the former government had granted. Currently, this success faces being overturned by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. What legal team is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court validates it, then a international entity contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: half that state's yearly income. Included in the legal team on his side? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this matter described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “once firms grasp the authority they’ve been granted, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That threat is now a reality. This year, energy and resource corporations have filed a historic level of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to halt global warming. Firms have to date won $114bn by using ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP