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Can you reckon our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that was how it used to work. No longer.

The Advent of Offshore Arbitration Panels

Today, overseas companies, or the wealthy individuals who own them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these bodies allow no right of appeal or judicial review. You or I cannot take a case to them, just as our government, including businesses operating from this country. They are open exclusively to corporations registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The government may have to drop the legislation. It becomes hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and private equity bankroll lawsuits in return for a cut of the takings. The result? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions made by legislatures is that this provision has been written – without public consent, and often in conditions of profound opacity – within trade treaties.

A Specific Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the consent the former government had granted. Today, this legal outcome could be compromised by an offshore tribunal answering to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the state? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The state passes a law, the domestic court upholds it, then a international entity challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has previously filed a claim against another European state on these grounds, seeking $16bn: an amount representing half nation's annual revenue. Part of the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that such things wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That threat has now materialised. Recently, energy and resource corporations have filed a record number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – official measures to halt climate breakdown. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP