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How do you reckon our political system works? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, international firms, along with the billionaires who own them, can sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums are based not on tangible damages but funds the panel members decide the company would perhaps have made. The state could be forced to abandon its policy. It becomes deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being brought, as firms learn from each other, and private equity bankroll lawsuits in return for a share of the takings. The outcome? Democratic sovereignty and democratic governance are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer found that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government later cancelled the permission the former government had granted. Currently, this legal outcome faces being overturned by an secret arbitration panel reporting to only the companies petitioning it.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was established to hear it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has little idea how much this might be. Who is representing it challenging the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it is highly possible that he may employ the tribunal to fight the penalties the UK imposed on him after the Russian aggression. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly income. Included in the lawyers on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this topic labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the authority they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP