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What is your understand our political system works? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises based in this country. The door is open solely for corporations based overseas.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These sums constitute not tangible damages but funds the panel members decide the company might otherwise have made. The state could be forced to abandon its policy. It is deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Record numbers of disputes are being brought, as corporations learn from each other, and investment funds fund legal actions in exchange for a share of the awards. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices enacted by legislatures is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the senior court. The justice determined that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the previous government, 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. Today, this success is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

In August, a firm whose final controllers reside in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. What legal team is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK levied against him after the war in Ukraine. He has previously started suing another European state with similar intent, seeking a colossal sum: equivalent to half of nation's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this issue described activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence they now possess, they will turn their attention from the weak nations to the strong ones” were met with general mockery.

That threat has now materialised. Recently, energy and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP