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How do you understand our political system functions? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, and the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to entities based overseas.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it may order compensation of vast sums, running into billions.

These awards constitute not actual losses but money the panel members decide the company could potentially have made. The state might be compelled to abandon its policy. It will be deterred from passing future laws of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being initiated, as companies observe each other, and hedge funds bankroll lawsuits for a share of a share of the awards. The result? Democratic sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The judge determined that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government then withdrew the licence the former government had granted. Currently, this success faces being overturned by an offshore tribunal accountable to only the corporations bringing the case.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was established to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. We have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him following the Russian aggression. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: an amount representing half state's yearly budget. Among the legal team on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine desperately needs.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An expert on this topic labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms start to realise the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have lodged a historic level of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have so far won vast sums by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP