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How do you perceive our political system works? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. However, that used to be how it once functioned. No longer.

The Rise of Secret Arbitration Panels

In the modern era, international firms, and the oligarchs that control them, have the power to sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases take place in secret. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even businesses headquartered in this country. Access is granted only to businesses based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but funds the panel members decide the company could potentially have made. The administration might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as firms observe each other, and investment funds finance suits in return for a portion of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices taken by elected bodies is that this clause has been incorporated – without public consent, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, activists secured a significant win at the high court. The judge found that schemes to dig the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration then withdrew the consent the former government had issued. Now, this victory is under threat by an offshore tribunal accountable to only the corporations bringing the case.

Last August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Recently a arbitration panel in the United States was set up to hear it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him following the invasion of Ukraine. He has already started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of government’s yearly income. Included in the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in using frozen Russian assets as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by scepticism.

That prediction has now materialised. Recently, energy and resource corporations have filed a historic level of cases against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to halt global warming. Firms have so far won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP