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Can you perceive our political system functions? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that used to be how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

Today, overseas companies, along with the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals grant no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. The door is open exclusively to businesses based overseas.

When a secret court finds that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but funds the arbitrators decide the company would perhaps have made. The state might be compelled to rescind the measure. It will be deterred from introducing similar legislation in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as companies take cues from each other, and private equity finance suits in exchange for a cut of the awards. The result? Sovereignty and democracy are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings enacted by parliaments is that this stipulation has been written – without democratic mandate, and often in conditions of total confidentiality – within international trade agreements.

A Real-World Example: The Cumbrian Coalmine

A year ago, activists won a great victory at the senior court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the consent the former government had approved. Currently, this victory could be compromised by an secret arbitration panel reporting to exclusively the corporations petitioning it.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no idea how much this could amount to. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the restrictions the UK imposed on him following the Russian aggression. He has previously filed a claim against another European state for this reason, claiming a colossal sum: an amount representing half state's yearly income. Part of the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these events were not possible. In 2014, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the power bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the UK mine – official measures to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP