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Can you perceive our political system operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place in secret. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it can award damages of hundreds of millions, potentially billions.

This compensation represent not actual losses but funds the tribunal officials conclude the company might otherwise have made. The administration could be forced to abandon its policy. It is discouraged from passing future laws in that area, worried about facing litigation.

A Process Running Rampant

Record numbers of legal actions are being brought, as companies observe each other, and private equity finance suits in exchange for a cut of the awards. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings made by legislatures is that this clause has been incorporated – absent public approval, and frequently under a climate of profound opacity – into trade treaties.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the permission the former government had approved. Today, this success is under threat by an secret arbitration panel accountable to no one but the companies filing the suit.

During August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. What legal team is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a foreign company challenges it through an secretive private court, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK enacted against him following the war in Ukraine. He has already started suing another European state for this reason, seeking $16bn: an amount representing half government’s annual revenue. Among the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

We were assured that these events could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, energy and resource corporations have initiated a unprecedented number of claims against nations rich and poor, challenging – similar to the UK mine – state efforts to prevent global warming. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP