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What is your reckon our political system works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals who own them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. They are open solely for corporations operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but money the panel members conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is hesitant to passing future laws in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as firms learn from each other, and private equity bankroll lawsuits in exchange for a share of the takings. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions made by elected bodies is that this clause has been inserted – without public consent, and frequently under conditions of profound opacity – into trade treaties.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer ruled that plans to open the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The new government then withdrew the licence the former government had granted. Today, this legal outcome faces being overturned by an foreign court reporting to only the companies petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a international entity challenges it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the restrictions the UK levied against him following the war in Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding $16bn: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

Politicians promised that such things were not possible. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a issue in the past.” An expert on this matter labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have to date won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP