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What is your reckon our political system operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that used to be how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, international firms, and the wealthy individuals who own them, can sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held behind closed doors. Unlike our courts, these panels grant no right of appeal or legal review. You or I cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open only to entities based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These awards represent not actual losses but money the tribunal officials determine the company might otherwise have made. The administration could be forced to abandon its policy. It is hesitant to passing future laws in that area, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and private equity fund legal actions in return for a share of the awards. The result? National sovereignty and democratic governance are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices taken by elected bodies is that this stipulation has been written – absent public approval, and frequently under an atmosphere of profound opacity – within trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, activists secured a significant win at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the permission the former government had approved. Currently, this success is under threat by an foreign court reporting to exclusively the corporations petitioning it.

In August, a company whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this might be. Which individual is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a international entity challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him following the Russian aggression. He has already started suing another European state with similar intent, demanding $16bn: half that nation's yearly budget. Part of the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that such things could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. This year, fossil fuel and extraction companies have lodged a record number of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP