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What is your reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. End of story. However, that’s how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, along with the billionaires who own them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these bodies grant no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted exclusively to corporations based overseas.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

This compensation constitute not actual losses but money the panel members decide the company might otherwise have made. The state might be compelled to drop the legislation. It will be deterred from passing future laws along the same lines, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as companies take cues from each other, and investment funds fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings made by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – inside trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the consent the previous administration had approved. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the corporations petitioning it.

In August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Recently a arbitration panel in Washington DC was established to hear it.

The claimant is suing the UK for the money it might have made if the mine had received permission to proceed. The public has no idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming $16bn: an amount representing half government’s yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms start to realise the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, oil and gas and mining firms have lodged a unprecedented number of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to stop global warming. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP