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What is your understand our political system works? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires that control them, have the power to sue nation states for the laws they pass, at private courts staffed by corporate lawyers. Such disputes take place in secret. Unlike our courts, these tribunals grant no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, including businesses operating from this country. They are open only to corporations based overseas.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but funds the panel members determine the company would perhaps have made. The administration may have to drop the legislation. It will be discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as corporations observe each other, and private equity fund legal actions for a share of a cut of the takings. The result? Sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid conditions of profound opacity – inside international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that schemes to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government then withdrew the licence the previous administration had granted. Currently, this success could be compromised by an foreign court reporting to no one but the entities bringing the case.

In August, a firm whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation disputes it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it seems likely that he will utilise the tribunal to fight the restrictions the UK levied against him after the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of nation's yearly income. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that these scenarios could not occur. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, stated: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this matter accused activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That warning is now a reality. Recently, oil and gas and mining firms have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP