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Can you perceive our political system operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or legal review. You or I are unable to file a case to them, just as our government, including enterprises operating from this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but compensation the panel members determine the company would perhaps have made. The state may have to drop the legislation. It will be hesitant to passing future laws along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations take cues from each other, and private equity fund legal actions in exchange for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by elected bodies is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The Labour government then withdrew the consent the previous administration had granted. Today, this legal outcome is under threat by an foreign court answering to only the corporations bringing the case.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had been allowed to go ahead. We have no idea how much this could amount to. Who is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has already started suing another European state for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Included in the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that such things could not occur. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this issue described activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That threat has now materialised. Recently, fossil fuel and extraction companies have filed a historic level of claims against nations rich and poor, challenging – similar to the Whitehaven project – official measures to halt global warming. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP