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Can you reckon our political system operates? It could be something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. However, that was how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

Today, international firms, and the oligarchs who own them, can sue governments for the regulations they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. The door is open solely for entities operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation are based not on tangible damages but compensation the tribunal officials determine the company might otherwise have made. The state may have to drop the legislation. It is deterred from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being brought, as corporations take cues from each other, and investment funds finance suits in exchange for a share of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings made by legislatures is that this clause has been written – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The justice found that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the licence the previous administration had issued. Today, this victory could be compromised by an foreign court accountable to exclusively the corporations bringing the case.

In August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The company is suing the UK for the money it would have generated if the mine had been permitted to commence operations. The public has no idea how much this might be. What legal team is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case to date, but it is highly possible that he will utilise the ISDS mechanism to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding $16bn: half that state's yearly budget. Part of the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that these events wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by scepticism.

That prediction has now materialised. This year, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have to date won vast sums via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP