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How do you perceive our political system functions? Maybe similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Rise of Secret Arbitration Panels

Today, foreign corporations, or the oligarchs that control them, can sue nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are held behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards represent not actual losses but money the arbitrators decide the company would perhaps have made. The administration may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions made by parliaments is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The new government subsequently revoked the licence the previous administration had granted. Currently, this victory is under threat by an offshore tribunal reporting to only the corporations filing the suit.

Last August, a company whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no idea how much this might be. Which individual is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it appears probable that he’ll use the tribunal to fight the sanctions the UK enacted against him following the war in Ukraine. He has started suing another European state on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Included in the legal team on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that such things were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” An adviser on this issue labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms start to realise the authority they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. Recently, energy and mining firms have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to stop global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP