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How do you understand our political system operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals composed of business advocates. Such disputes are held in secret. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open only to entities registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order damages of vast sums, even billions.

This compensation represent not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The administration may have to abandon its policy. It is hesitant to enacting future policies along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being filed, as firms take cues from each other, and hedge funds fund legal actions for a share of a cut of the awards. The consequence? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions made by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge determined that plans to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The new government then withdrew the consent the former government had granted. Now, this legal outcome could be compromised by an offshore tribunal answering to no one but the companies filing the suit.

Last August, a company whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. Who is representing it challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a international entity contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it appears probable that he’ll use the tribunal to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has already initiated proceedings against a small nation on these grounds, claiming a colossal sum: equivalent to half of nation's yearly budget. Among the counsel representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these events could not occur. Previously, a senior politician, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this topic accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That warning has come to pass. This year, energy and extraction companies have initiated a historic level of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP