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How do you perceive our political system functions? Maybe something like this. We elect MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, and the billionaires that control them, can sue elected administrations for the laws they pass, at private courts made up of corporate lawyers. The cases are held in secret. Unlike our courts, these tribunals provide no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses based in this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, even billions.

This compensation represent not real financial harm but compensation the tribunal officials decide the company could potentially have made. The state could be forced to drop the legislation. It becomes hesitant to passing future laws along the same lines, for fear of facing litigation.

A System Running Rampant

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The result? Sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions taken by legislatures is that this provision has been written – without democratic mandate, and typically amid conditions of profound opacity – inside trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the consent the previous administration had issued. Today, this success is under threat by an secret arbitration panel answering to exclusively the companies filing the suit.

During August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the high court validates it, then a international entity disputes it through an undemocratic private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK imposed on him following the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: half that state's annual revenue. Among the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that such things could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by scepticism.

That threat has now materialised. This year, oil and gas and mining firms have lodged a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP