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Can you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires behind them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held in secret. Unlike our courts, these panels allow no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These awards represent not real financial harm but money the arbitrators conclude the company could potentially have made. The administration may have to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as firms observe each other, and private equity finance suits in return for a share of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions taken by parliaments is that this stipulation has been written – without public consent, and frequently under a climate of profound opacity – into international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge ruled that proposals to open the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had issued. Today, this victory could be compromised by an foreign court answering to no one but the entities filing the suit.

In August, a company whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. The public has no idea how much this could amount to. Which individual is representing it challenging the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it appears probable that he may employ the arbitration process to fight the penalties the UK levied against him subsequent to the Russian aggression. He has started suing a small nation for this reason, claiming sixteen billion dollars: an amount representing half state's yearly budget. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that these events could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That warning has come to pass. This year, energy and resource corporations have lodged a historic level of cases against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP