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Can you reckon our political system works? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is upheld 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 Tribunals

Today, overseas companies, and the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals allow no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, including enterprises operating from this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on real financial harm but money the panel members determine the company might otherwise have made. The administration could be forced to drop the legislation. It will be deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as companies observe each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The result? Sovereignty and popular rule are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices enacted by parliaments is that this clause has been written – without democratic mandate, and frequently under conditions of profound opacity – within international trade agreements.

A Specific Example: The UK Coalmine

A year ago, activists secured a significant win at the high court. The justice determined that proposals to open the first new deep coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the permission the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

During August, a company whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was established to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had received permission to proceed. The public has no idea how much this could amount to. Which individual is serving as its counsel against the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company challenges it through an undemocratic private court, and a elected official represents its behalf.

The Russian Case

Concurrently that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, seeking $16bn: half that government’s yearly budget. Among the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these scenarios were not possible. In 2014, a government leader, championing the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this issue described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That prediction is now a reality. This year, energy and extraction companies have initiated a historic level of claims against nations rich and poor, contesting – like the example of the UK mine – government attempts to halt environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP