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Can you perceive our political system operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, international firms, along with the wealthy individuals that control them, can sue elected administrations for the policies they pass, at private courts staffed by business advocates. The cases are held in secret. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open only to entities based overseas.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it can award damages of hundreds of millions, potentially billions.

These awards are based not on real financial harm but funds the panel members conclude the company could potentially have made. The administration may have to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, for fear of being sued.

A System Growing Exponentially

Record numbers of cases are being brought, as corporations learn from each other, and investment funds finance suits for a share of a share of the awards. The result? Sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the decisions taken by legislatures is that this clause has been inserted – absent public approval, and often in an atmosphere of profound opacity – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer found that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the permission the previous administration had issued. Now, this victory faces being overturned by an secret arbitration panel answering to only the companies bringing the case.

In August, a corporate entity whose final controllers reside in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had received permission to go ahead. The public has little idea how much this might be. What legal team is serving as its counsel 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 domestic court validates it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it appears probable that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him following the Russian aggression. He has initiated proceedings against another European state on these grounds, seeking $16bn: half that state's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this issue described activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a record number of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won vast sums via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP