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What is your reckon our political system works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Today, overseas companies, along with the billionaires that control them, can sue governments for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including companies operating from this country. They are open solely for entities based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but funds the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being initiated, as firms take cues from each other, and hedge funds finance suits in exchange for a share of the awards. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by parliaments is that this provision has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Specific Instance: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The judge found that plans to dig the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had approved. Now, this legal outcome could be compromised by an offshore tribunal reporting to exclusively the companies bringing the case.

During August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in Washington DC was established to hear it.

This firm 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 challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: half that nation's yearly budget. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios were not possible. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That warning has come to pass. In the current period, fossil fuel and resource corporations have initiated a record number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP