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What is your perceive our political system works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

In the modern era, foreign corporations, or the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including businesses headquartered in this country. They are open exclusively to businesses based overseas.

When a secret court finds that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but funds the arbitrators determine the company might otherwise have made. The government may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as corporations take cues from each other, and hedge funds fund legal actions in return for a cut of the takings. The result? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – into trade treaties.

A Concrete Instance: The UK Coal Mine

Last year, a conservation group secured a significant win at the High Court. The judge determined that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The Labour government subsequently revoked the permission the Tories had issued. Currently, this legal outcome could be compromised by an secret arbitration panel answering to only the companies filing the suit.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. We have no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has previously started suing a small nation for this reason, seeking a colossal sum: an amount representing half nation's yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic accused activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with scepticism.

That warning is now a reality. This year, fossil fuel and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP