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How do you understand our political system works? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, overseas companies, along with the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including businesses operating from this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

These sums are based not on real financial harm but money the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It will be hesitant to passing future laws in that area, due to the risk of being sued.

A System Running Rampant

Historically high figures of legal actions are being filed, as companies take cues from each other, and investment funds fund legal actions in return for a cut of the settlements. The consequence? Democratic sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by parliaments is that this stipulation has been incorporated – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The new government then withdrew the licence the former government had granted. Today, this legal outcome is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has little idea how much this might be. Who is acting on its behalf against the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary validates it, then a international entity challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him following the war in Ukraine. He has already filed a claim against a small nation for this reason, claiming a colossal sum: equivalent to half of nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An adviser on this issue accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That warning has now materialised. This year, fossil fuel and extraction companies have initiated a record number of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to stop climate breakdown. Firms have thus far won vast sums by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP