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Can you reckon our political system operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the billionaires behind them, have the power to sue elected administrations for the policies they pass, at private courts made up of business advocates. Such disputes take place in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

These sums represent not real financial harm but money the tribunal officials conclude the company could potentially have made. The administration might be compelled to drop the legislation. It will be deterred from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The consequence? Sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions taken by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Example: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice found that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had approved. Currently, this victory could be compromised by an offshore tribunal accountable to only the companies bringing the case.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Which individual is representing it in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know little of the case to date, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him following the invasion of Ukraine. He has already started suing a small nation on these grounds, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Among the counsel on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that such things could not occur. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this issue accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and mining firms have filed a unprecedented number of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP