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What is your reckon our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. End of story. Well, that was how it used to work. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, along with the oligarchs who own them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of vast sums, running into billions.

These sums are based not on real financial harm but compensation the panel members decide the company might otherwise have made. The government could be forced to rescind the measure. It becomes discouraged from introducing similar legislation in that area, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The consequence? Sovereignty and democracy are now prohibitively expensive.

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

A Specific Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer determined that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had granted. Now, this success could be compromised by an offshore tribunal answering to exclusively the corporations filing the suit.

Last August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The claimant is suing the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it appears probable that he may employ the arbitration process to challenge the penalties the UK imposed on him after the Russian aggression. He has started suing Luxembourg with similar intent, claiming a colossal sum: equivalent to half of nation's annual revenue. Among the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that such things wouldn’t happen. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That threat has now materialised. Recently, energy and extraction companies have initiated a record number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP