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Can you perceive our political system works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

Nowadays, international firms, and the oligarchs behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted in secret. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to entities registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The state could be forced to rescind the measure. It is deterred from passing future laws along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and private equity finance suits in exchange for a share of the settlements. The consequence? National sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices made by elected bodies is that this provision has been incorporated – absent public approval, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Today, this legal outcome could be compromised by an secret arbitration panel reporting to no one but the companies filing the suit.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. What legal team is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The government makes a decision, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he may employ the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has filed a claim against another European state with similar intent, seeking sixteen billion dollars: half that nation's yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these scenarios could not occur. Years ago, a government leader, championing the most significant and hazardous of all these agreements, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter described critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has come to pass. This year, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won $114bn through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP