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What is your perceive our political system works? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, and the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts staffed by corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these panels provide no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These awards constitute not actual losses but funds the panel members decide the company might otherwise have made. The administration could be forced to rescind the measure. It is hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as corporations observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings taken by parliaments is that this clause has been incorporated – without public consent, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Instance: The UK Coalmine

A year ago, activists won a great victory at the high court. The presiding officer ruled that plans to dig the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Today, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the companies filing the suit.

In August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Who is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state passes a law, the national judiciary supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it seems likely that he may employ the arbitration process to challenge the restrictions the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against another European state for this reason, claiming $16bn: half that government’s yearly budget. Among the legal team on his side? the wife of a former prime minister, married to the former British prime minister.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that such things could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and there has not been a case in the past.” An expert on this issue labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That threat has now materialised. Recently, fossil fuel and mining firms have lodged a historic level of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – state efforts to stop global warming. Companies have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP