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What is your understand our political system functions? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Yet, that’s how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue governments for the regulations they pass, at private courts composed of business advocates. The cases take place in secret. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even businesses based in this country. Access is granted only to businesses registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but funds the arbitrators conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It is deterred from passing future laws in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations take cues from each other, and investment funds fund legal actions in return for a cut of the awards. The result? Sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the choices taken by elected bodies is that this provision has been written – absent public approval, and often in a climate of extreme secrecy – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, activists won a great victory at the High Court. The presiding officer found that plans to open the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The incoming administration later cancelled the consent the previous administration had issued. Currently, this legal outcome is under threat by an secret arbitration panel answering to no one but the corporations petitioning it.

In August, a company whose final controllers are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. The public has little idea how much this might be. Who is serving as its counsel against the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case at present, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK levied against him following the war in Ukraine. He has already initiated proceedings against another European state for this reason, seeking sixteen billion dollars: half that state's yearly income. Among the counsel on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That warning is now a reality. This year, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to stop environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP