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How do you understand our political system works? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, or the billionaires who own them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted solely for businesses registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but money the panel members conclude the company could potentially have made. The administration could be forced to rescind the measure. It is hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations observe each other, and hedge funds finance suits in exchange for a cut of the settlements. The result? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions taken by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The judge found that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the consent the former government had issued. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a firm whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a dispute settlement body in the United States was convened to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no idea how much this sum represents. Which individual is serving as its counsel against the state? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case so far, but it seems likely that he may employ the tribunal to contest the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against another European state for this reason, demanding $16bn: an amount representing half state's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that such things wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this issue labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations start to realise the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning is now a reality. In the current period, fossil fuel and mining firms have filed a record number of claims against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to stop global warming. Companies have thus far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP