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What is your understand our political system operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. Well, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of business advocates. Such disputes take place in secret. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, including businesses based in this country. They are open only to businesses registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, even billions.

These sums constitute not tangible damages but funds the tribunal officials conclude the company could potentially have made. The state could be forced to rescind the measure. It becomes discouraged from passing future laws along the same lines, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the awards. The result? Sovereignty and popular rule are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices enacted by parliaments is that this clause has been written – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The justice ruled that proposals to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The Labour government subsequently revoked the consent the former government had approved. Today, this legal outcome faces being overturned by an offshore tribunal answering to no one but the entities petitioning it.

Last August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was established to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a international entity disputes it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he will utilise the tribunal to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: half that state's yearly budget. Included in the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that these scenarios were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this topic accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and resource corporations have filed a unprecedented number of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP