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What is your reckon our political system works? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Yet, that used to be how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, and the oligarchs that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations based overseas.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

This compensation are based not on actual losses but funds the tribunal officials decide the company could potentially have made. The government might be compelled to drop the legislation. It is deterred from introducing similar legislation along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as corporations observe each other, and private equity finance suits for a share of a share of the takings. The consequence? Sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the licence the former government had approved. Currently, this legal outcome could be compromised by an foreign court accountable to exclusively the entities bringing the case.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the US capital was set up to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to proceed. We have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a international entity challenges it through an secretive private court, and a elected official works for its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case so far, but it appears probable that he’ll use the arbitration process to challenge the sanctions the UK levied against him after the Russian aggression. He has already filed a claim against a small nation for this reason, seeking a colossal sum: half that state's yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” A consultant on this matter accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies grasp the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That warning has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of suits against nations rich and poor, opposing – similar to the Whitehaven project – state efforts to stop environmental catastrophe. Companies have so far won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP