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How do you perceive our political system functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

Today, overseas companies, and the oligarchs who own them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to corporations based overseas.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards are based not on tangible damages but compensation the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Record numbers of disputes are being brought, as firms take cues from each other, and private equity fund legal actions for a share of a portion of the takings. The consequence? Sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions enacted by legislatures is that this clause has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer ruled that plans to open the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had approved. Now, this victory is under threat by an foreign court reporting to only the corporations petitioning it.

Last August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit against the UK government. Last week a tribunal in Washington DC was established to consider the case.

The claimant is litigating against the UK for the money it could have earned 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 representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The government passes a law, the domestic court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him subsequent to the Russian aggression. He has filed a claim against Luxembourg for this reason, demanding $16bn: an amount representing half nation's yearly income. Among the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as security for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that these events were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” An adviser on this topic labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That prediction is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to prevent climate breakdown. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP