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Can you understand our political system works? It could be similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs who own them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation constitute not actual losses but money the arbitrators determine the company would perhaps have made. The state could be forced to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The result? National sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the choices enacted by elected bodies is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the senior court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government subsequently revoked the permission the former government had issued. Currently, this victory is under threat by an offshore tribunal answering to no one but the entities petitioning it.

In August, a company whose beneficial owners reside in the tax haven initiated proceedings against the UK government. Last week a tribunal in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half government’s annual revenue. Part of the lawyers representing him there? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this issue labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has come to pass. This year, fossil fuel and resource corporations have lodged a historic level of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP