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What is your understand our political system works? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that used to be how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

Today, international firms, or the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open exclusively to entities based overseas.

If a tribunal determines that a legislative action could harm the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

These sums represent not tangible damages but compensation the panel members conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes discouraged from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the takings. The consequence? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the rulings made by elected bodies is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – into trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge determined that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this victory is under threat by an offshore tribunal answering to exclusively the corporations bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously started suing another European state on these grounds, seeking $16bn: equivalent to half of nation's yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen state funds as security for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these scenarios could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has never been a problem in the past.” A consultant on this topic labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. This year, energy and resource corporations have initiated a record number of suits against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to stop global warming. Companies have so far won $114bn via ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP