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What is your perceive our political system functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. End of story. However, that was how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, along with the oligarchs that control them, can sue elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open exclusively to businesses registered abroad.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it can award compensation of vast sums, even billions.

These sums are based not on actual losses but funds the panel members determine the company could potentially have made. The administration could be forced to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being brought, as corporations learn from each other, and hedge funds finance suits in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been written – absent public approval, and often in a climate of extreme secrecy – within trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that plans to open the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the permission the previous administration had granted. Today, this victory is under threat by an offshore tribunal reporting to exclusively the companies petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have no idea how much this might be. Which individual is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was established, information emerged 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 to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK enacted against him after the invasion of Ukraine. He has started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that state's yearly income. Part of the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that such things could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies begin to understand the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That warning has come to pass. This year, energy and resource corporations have lodged a record number of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP