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What is your perceive our political system works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

Today, overseas companies, or the oligarchs who own them, are able to litigate against elected administrations for the policies they pass, at private courts staffed by commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises based in this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it can award compensation of vast sums, running into billions.

These awards are based not on tangible damages but funds the tribunal officials decide the company would perhaps have made. The administration could be forced to rescind the measure. It is discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Record numbers of disputes are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? Democratic sovereignty and popular rule are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the decisions made by elected bodies is that this stipulation has been written – without public consent, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Now, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to proceed. The public has no idea how much this sum represents. What legal team is representing it against the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The government makes a decision, the high court validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing a small nation for this reason, seeking a colossal sum: equivalent to half of state's annual revenue. Among the lawyers on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that such things wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An expert on this issue labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That warning has come to pass. In the current period, energy and extraction companies have initiated a historic level of claims against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP