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What is your reckon our political system functions? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, international firms, and the wealthy individuals behind them, can sue nation states for the policies they pass, at private courts made up of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these tribunals grant no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies operating from this country. The door is open only to businesses registered abroad.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but compensation the panel members decide the company would perhaps have made. The state might be compelled to rescind the measure. It is discouraged from enacting future policies along the same lines, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds finance suits in exchange for a share of the settlements. The result? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the decisions made by elected bodies is that this provision has been incorporated – absent public approval, and often in conditions of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The Labour government subsequently revoked the licence the Tories had granted. Currently, this victory is under threat by an secret arbitration panel answering to no one but the companies filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Who is representing it in opposition to the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the high court validates it, then a international entity challenges it through an secretive private court, and a sitting MP works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against another European state with similar intent, demanding a colossal sum: equivalent to half of nation's annual revenue. Among the legal team representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “as corporations start to realise the influence bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. In the current period, energy and resource corporations have lodged a record number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have so far won $114bn via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP