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How do you reckon our political system works? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to corporations based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it has the power to grant compensation of vast sums, potentially billions.

These sums represent not real financial harm but funds the tribunal officials conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes deterred from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being filed, as firms learn from each other, and investment funds fund legal actions in exchange for a portion of the awards. The outcome? National sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions made by parliaments is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer found that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the Tories had issued. Today, this victory faces being overturned by an offshore tribunal accountable to no one but the entities filing the suit.

During August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is acting on its behalf challenging the state? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK levied against him following the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, seeking a colossal sum: an amount representing half nation's yearly income. Among the legal team on his side? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Warnings that “when companies begin to understand the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by general mockery.

That warning has now materialised. This year, energy and extraction companies have lodged a record number of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP