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Can you perceive our political system operates? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. The law are enforced by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, along with the oligarchs that control them, can sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. The cases take place in secret. Unlike our courts, these bodies provide no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards are based not on tangible damages but funds the tribunal officials conclude the company could potentially have made. The government could be forced to rescind the measure. It becomes discouraged from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The new government then withdrew the permission the Tories had issued. Currently, this success is under threat by an secret arbitration panel reporting to only the corporations petitioning it.

During August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was set up to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had received permission to commence operations. We have little idea how much this could amount to. What legal team is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK levied against him following the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of nation's yearly budget. Part of the legal team on his side? a prominent lawyer, wife of the previous PM.

Legal experts contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. This year, energy and resource corporations have initiated a record number of suits against nations rich and poor, challenging – like the example of the UK mine – state efforts to prevent environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP