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How do you understand our political system functions? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. The law are enforced by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, including enterprises operating from this country. Access is granted only to entities registered abroad.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

This compensation are based not on tangible damages but funds the panel members conclude the company could potentially have made. The administration could be forced to rescind the measure. It becomes deterred from passing future laws along the same lines, for fear of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as companies take cues from each other, and private equity bankroll lawsuits for a share of a portion of the awards. The result? National sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices made by parliaments is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had granted. Today, this success is under threat by an foreign court reporting to only the corporations petitioning it.

During August, a corporate entity whose final controllers reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been permitted to go ahead. Citizens have no clear indication how much this sum represents. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has started suing a small nation on these grounds, demanding $16bn: an amount representing half nation's yearly income. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that such things could not occur. In 2014, a government leader, promoting the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this topic labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Firms have thus far won vast sums through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP