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Can you understand our political system operates? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even businesses based in this country. The door is open exclusively to corporations registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions made by elected bodies is that this provision has been inserted – without public consent, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coal Mine

Last year, activists won a great victory at the High Court. The justice found that proposals to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on climate commitments. The incoming administration then withdrew the consent the former government had granted. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the entities bringing the case.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was set up to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. We have little idea how much this sum represents. Which individual is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case so far, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK imposed on him following the Russian aggression. He has previously initiated proceedings against another European state on these grounds, claiming $16bn: equivalent to half of government’s yearly budget. Among the lawyers representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that these events were not possible. Years ago, a former prime minister, promoting the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. This year, fossil fuel and extraction companies have lodged a historic level of claims against nations rich and poor, opposing – similar to the Whitehaven project – official measures to stop environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP