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What is your understand our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the billionaires who own them, have the power to sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, including companies operating from this country. The door is open solely for businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but funds the panel members decide the company could potentially have made. The administration could be forced to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of cases are being brought, as firms take cues from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The outcome? National sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by legislatures is that this clause has been inserted – absent public approval, and often in a climate of extreme secrecy – into international trade agreements.

A Specific Example: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The judge determined that plans to open the first major coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the permission the Tories had issued. Today, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. We have little idea how much this could amount to. Which individual is acting on its behalf against the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the domestic court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him after the Russian aggression. He has started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel on his side? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that these events were not possible. Years ago, a government leader, advocating for the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this issue described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were met with scepticism.

That prediction is now a reality. This year, oil and gas and resource corporations have initiated a unprecedented number of cases against nations rich and poor, contesting – as in the case of the UK mine – state efforts to halt climate breakdown. Firms have so far won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP