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What is your perceive our political system functions? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies operating from this country. They are open solely for businesses based overseas.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation represent not actual losses but money the tribunal officials determine the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a portion of the awards. The outcome? Sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by legislatures is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The judge determined that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the consent the Tories had issued. Currently, this victory could be compromised by an offshore tribunal reporting to only the companies filing the suit.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to hear it.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this might be. Which individual is representing it in opposition to the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: half that nation's yearly income. Among the counsel on his side? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these events were not possible. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An expert on this issue accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction is now a reality. Recently, oil and gas and extraction companies have lodged a unprecedented number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP