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What is your understand our political system works? It could be similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

Nowadays, international firms, or the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted only to entities based overseas.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not actual losses but compensation the tribunal officials determine the company might otherwise have made. The government may have to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions made by parliaments is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The justice found that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The new government then withdrew the permission the Tories had issued. Now, this legal outcome faces being overturned by an foreign court reporting to exclusively the entities bringing the case.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the United States was established to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Which individual is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has already started suing another European state for this reason, demanding $16bn: an amount representing half government’s yearly budget. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An expert on this issue accused critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies start to realise the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That threat is now a reality. This year, energy and mining firms have initiated a record number of cases against nations rich and poor, opposing – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have so far won $114bn via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP