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Can you reckon our political system functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Today, foreign corporations, along with the billionaires that control them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted exclusively to corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it may order damages of vast sums, even billions.

These awards represent not tangible damages but money the panel members decide the company could potentially have made. The government may have to drop the legislation. It becomes hesitant to passing future laws in that area, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? Sovereignty and democracy are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings made by legislatures is that this clause has been written – absent public approval, and frequently under conditions of total confidentiality – into international trade agreements.

A Specific Case: The UK Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The justice ruled that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The Labour government subsequently revoked the permission the former government had approved. Now, this success could be compromised by an offshore tribunal reporting to exclusively the entities bringing the case.

During August, a firm whose beneficial owners reside in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Part of the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that these events could not occur. In 2014, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Predictions that “when companies grasp the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. Recently, fossil fuel and mining firms have filed a historic level of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP