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Can you perceive our political system functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

Today, international firms, along with the wealthy individuals who own them, can sue governments for the regulations they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even enterprises based in this country. They are open solely for corporations registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

These awards are based not on tangible damages but money the panel members determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices taken by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under conditions of profound opacity – within trade treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, activists won a great victory at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the permission the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel accountable to only the corporations petitioning it.

During August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in the United States was convened 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 go ahead. The public has no clear indication how much this could amount to. What legal team is serving as its counsel challenging the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he may employ the tribunal to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has started suing a small nation on these grounds, claiming sixteen billion dollars: half that state's annual revenue. Among the lawyers on his side? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with scepticism.

That warning is now a reality. Recently, fossil fuel and extraction companies have initiated a historic level of cases against nations rich and poor, challenging – as in the case of the UK mine – official measures to halt environmental catastrophe. Firms have so far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP