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What is your understand our political system functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted exclusively to corporations registered abroad.

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

These awards represent not actual losses but compensation the tribunal officials decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and private equity finance suits in exchange for a cut of the takings. The outcome? Democratic sovereignty and democracy are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices made by parliaments is that this clause has been written – absent public approval, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the permission the former government had issued. Now, this victory could be compromised by an secret arbitration panel reporting to no one but the corporations petitioning it.

In August, a firm whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this might be. Who is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case at present, but it appears probable that he may employ the tribunal to contest the restrictions the UK imposed on him following the war in Ukraine. He has initiated proceedings against another European state for this reason, seeking a colossal sum: half that state's yearly budget. Among the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these scenarios could not occur. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That prediction has come to pass. Recently, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – similar to the UK mine – official measures to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP