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How do you understand our political system functions? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted only to businesses based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but money the arbitrators decide the company would perhaps have made. The state could be forced to rescind the measure. It is deterred from enacting future policies in that area, for fear of being sued.

A Process Running Rampant

Record numbers of cases are being brought, as companies observe each other, and hedge funds finance suits for a share of a cut of the settlements. The result? Sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices made by legislatures is that this provision has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Concrete Instance: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The Labour government subsequently revoked the consent the previous administration had approved. Today, this victory is under threat by an foreign court accountable to no one but the entities bringing the case.

Last August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was established to hear it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. Which individual is representing it challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the domestic court validates it, then a international entity disputes it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK levied against him following the invasion of Ukraine. He has previously started suing a small nation for this reason, seeking $16bn: half that government’s yearly budget. Included in the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this topic accused critics of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations start to realise the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with general mockery.

That warning is now a reality. This year, energy and mining firms have filed a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won $114bn by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP