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How do you reckon our political system works? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, along with the billionaires who own them, can sue elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for corporations registered abroad.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but money the panel members decide the company could potentially have made. The government might be compelled to rescind the measure. It is discouraged from enacting future policies of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of cases are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the awards. The outcome? National sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by parliaments is that this provision has been inserted – absent public approval, and typically amid conditions of extreme secrecy – within international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge determined that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the consent the Tories had issued. Now, this success faces being overturned by an offshore tribunal reporting to only the entities filing the suit.

During August, a firm whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a international entity challenges it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case to date, but it appears probable that he may employ the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that such things were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter described critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That prediction is now a reality. Recently, oil and gas and extraction companies have filed a record number of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP