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What is your understand our political system functions? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Today, international firms, and the billionaires behind them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted only to corporations registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not actual losses but money the tribunal officials conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It is hesitant to enacting future policies in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as corporations take cues from each other, and investment funds finance suits in exchange for a cut of the awards. The consequence? National sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the choices enacted by legislatures is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Instance: The UK Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The justice determined that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government then withdrew the consent the previous administration had issued. Now, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the entities petitioning it.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him following the invasion of Ukraine. He has already filed a claim against another European state for this reason, demanding $16bn: equivalent to half of nation's yearly budget. Among the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that these events could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – state efforts to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That equates to the combined GDP