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What is your reckon our political system functions? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses headquartered in this country. Access is granted exclusively to corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it can award financial penalties of vast sums, potentially billions.

This compensation constitute not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The state could be forced to drop the legislation. It becomes hesitant to passing future laws along the same lines, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations learn from each other, and investment funds fund legal actions in return for a share of the takings. The consequence? National sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the choices taken by elected bodies is that this clause has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – into trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group won a great victory at the high court. The justice ruled that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the former government had approved. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the corporations bringing the case.

During August, a company whose beneficial owners reside in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. Who is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK enacted against him following the invasion of Ukraine. He has already filed a claim against another European state for this reason, demanding sixteen billion dollars: half that nation's yearly income. Included in the lawyers representing him there? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms grasp the authority they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That warning has come to pass. This year, fossil fuel and mining firms have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP