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What is your reckon our political system works? Maybe similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these bodies allow no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. They are open exclusively to businesses operating from foreign soil.

If a tribunal determines that a government measure may compromise the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation are based not on actual losses but compensation the panel members conclude the company could potentially have made. The government may have to rescind the measure. It becomes hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and private equity fund legal actions in return for a portion of the settlements. The result? Sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions taken by parliaments is that this stipulation has been written – absent public approval, and typically amid conditions of total confidentiality – into trade treaties.

A Specific Case: The UK Coalmine

A year ago, a conservation group won a great victory at the High Court. The justice ruled that plans to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The new government later cancelled the consent the former government had granted. Currently, this legal outcome is under threat by an foreign court accountable to no one but the corporations bringing the case.

In August, a company whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Who is serving as its counsel against the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity challenges it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking a colossal sum: an amount representing half government’s yearly income. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these events were not possible. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has never been a problem in the past.” A consultant on this topic accused activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations begin to understand the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. This year, energy and mining firms have filed a record number of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That represents the combined GDP