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Can you understand our political system operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. Well, that was how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Nowadays, international firms, and the wealthy individuals behind them, have the power to sue nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held in secret. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to entities operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but funds the arbitrators conclude the company might otherwise have made. The government could be forced to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as companies learn from each other, and private equity finance suits in return for a share of the awards. The outcome? National sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices taken by parliaments is that this stipulation has been inserted – absent public approval, and often in a climate of extreme secrecy – within international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice ruled that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the consent the former government had granted. Now, this legal outcome is under threat by an foreign court answering to only the corporations filing the suit.

During August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state makes a decision, the domestic court validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: half that state's yearly income. Among the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these events were not possible. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this issue described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which oil majors have secured $84bn. That represents the combined GDP