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What is your perceive our political system works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Emergence of Secret Arbitration Panels

Nowadays, overseas companies, or the billionaires who own them, can sue nation states for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to entities operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions, even billions.

These awards constitute not actual losses but money the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be deterred from introducing similar legislation in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the settlements. The consequence? Sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions taken by legislatures is that this stipulation has been written – without public consent, and typically amid a climate of total confidentiality – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the High Court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had approved. Today, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the companies filing the suit.

During August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have no clear indication how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The government passes a law, the high court supports it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the court 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, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he will utilise 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 on these grounds, demanding sixteen billion dollars: half that state's annual revenue. Among the legal team acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that these scenarios were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” A consultant on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “when companies grasp the authority bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with scepticism.

That warning has come to pass. This year, fossil fuel and resource corporations have filed a historic level of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP