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How do you understand our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs behind them, can sue nation states for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses based in this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it can award financial penalties of vast sums, running into billions.

This compensation represent not real financial harm but compensation the panel members conclude the company might otherwise have made. The government may have to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as companies take cues from each other, and hedge funds fund legal actions in exchange for a share of the takings. The consequence? National sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings taken by elected bodies is that this clause has been incorporated – absent public approval, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, activists won a great victory at the high court. The judge found that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the entities filing the suit.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to commence operations. We have no idea how much this might be. Who is serving as its counsel against the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK levied against him following the Russian aggression. He has started suing another European state for this reason, demanding $16bn: an amount representing half state's yearly budget. Included in the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Escalating Risks

The public was told that such things could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies begin to understand the influence they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. Recently, energy and extraction companies have filed a historic level of cases against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP