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How do you understand our political system functions? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals who own them, can sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases are held away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the tribunal officials decide the company could potentially have made. The administration could be forced to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as firms learn from each other, and private equity bankroll lawsuits for a share of a share of the takings. The outcome? Democratic sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the decisions taken by legislatures is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – into international trade agreements.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the senior court. The judge ruled that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the consent the Tories had approved. Now, this victory could be compromised by an foreign court accountable to only the corporations petitioning it.

In August, a firm whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has no idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The state passes a law, the national judiciary supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK levied against him after the Russian aggression. He has started suing a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Included in the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these events were not possible. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. Recently, fossil fuel and mining firms have filed a unprecedented number of suits against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP