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How do you understand our political system functions? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

Today, overseas companies, and the billionaires that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases take place in secret. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies based in this country. The door is open only to corporations based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These awards constitute not actual losses but money the tribunal officials conclude the company could potentially have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, worried about facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The consequence? National sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and often in an atmosphere of total confidentiality – into international trade agreements.

A Specific Example: The Whitehaven Coalmine

Last year, activists won a great victory at the high court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have zero effect on climate commitments. The new government then withdrew the licence the Tories had granted. Today, this victory could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a company whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has no idea how much this might be. Which individual is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK imposed on him following the war in Ukraine. He has started suing Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly income. Included in the counsel representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that these scenarios were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” A consultant on this matter described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms start to realise the power they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and resource corporations have lodged a historic level of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP