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Can you understand our political system functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, overseas companies, and the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open only to businesses operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it can award damages of vast sums, running into billions.

These awards represent not actual losses but compensation the tribunal officials decide the company could potentially have made. The government could be forced to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A System Running Rampant

Historically high figures of legal actions are being initiated, as firms take cues from each other, and investment funds fund legal actions in exchange for a portion of the awards. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the choices enacted by elected bodies is that this provision has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Now, this success could be compromised by an offshore tribunal reporting to no one but the entities filing the suit.

During August, a firm whose ultimate owners reside in the tax haven initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Case

On the same day that the court on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK enacted against him after the war in Ukraine. He has filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of nation's yearly budget. Included in the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that these scenarios were not possible. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. This year, oil and gas and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – similar to the UK mine – government attempts to stop global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP