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What is your understand our political system works? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

Today, foreign corporations, and the oligarchs behind them, can sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. Such disputes take place in secret. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including businesses operating from this country. They are open only to corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, even billions.

This compensation represent not tangible damages but funds the arbitrators determine the company might otherwise have made. The government may have to drop the legislation. It becomes deterred from introducing similar legislation in that area, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices made by parliaments is that this clause has been incorporated – without public consent, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on national carbon targets. The new government then withdrew the permission the former government had approved. Today, this success is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a firm whose final controllers reside in the tax haven lodged a claim challenging the UK government. Recently a tribunal in Washington DC was convened to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. We have no idea how much this might be. What legal team is representing it challenging the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has already initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Among the lawyers representing him there? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that such things could not occur. Previously, a former prime minister, advocating for 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 issue in the past.” A consultant on this matter described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has now materialised. In the current period, energy and extraction companies have initiated a record number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP