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Can you understand our political system functions? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. End of story. Well, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, along with the billionaires who own them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open exclusively to businesses operating from foreign soil.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These sums are based not on actual losses but compensation the tribunal officials conclude the company might otherwise have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as corporations learn from each other, and investment funds fund legal actions in exchange for a cut of the awards. The result? Sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the choices taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Specific Case: The UK Coalmine

Last year, a conservation group won a great victory at the High Court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the former government had granted. Currently, this victory could be compromised by an offshore tribunal reporting to only the companies filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. Last week a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against another European state on these grounds, seeking sixteen billion dollars: half that nation's annual revenue. Included in the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Costs

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms start to realise the authority they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That threat has now materialised. Recently, oil and gas and extraction companies have lodged a historic level of claims against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP