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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. If a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but money the arbitrators conclude the company would perhaps have made. The state might be compelled to abandon its policy. It will be discouraged from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as corporations observe each other, and hedge funds fund legal actions in return for a cut of the awards. The outcome? National sovereignty and popular rule are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by legislatures is that this provision has been written – without public consent, and typically amid an atmosphere of profound opacity – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the high court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had approved. Now, this success could be compromised by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was set up to hear it.

The company is suing the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company disputes it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him following the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, seeking $16bn: half that nation's yearly budget. Part of the legal team on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these events could not occur. Years ago, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this topic labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with general mockery.

That threat has come to pass. This year, fossil fuel and mining firms have lodged a record number of claims against nations across the economic spectrum, contesting – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP