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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. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

Today, international firms, or the oligarchs who own them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are held in secret. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. Access is granted exclusively to entities based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but funds the panel members decide the company might otherwise have made. The administration could be forced to drop the legislation. It becomes hesitant to passing future laws of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as corporations learn from each other, and hedge funds fund legal actions in return for a share of the settlements. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings made by legislatures is that this clause has been inserted – absent public approval, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge determined that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration later cancelled the permission the former government had granted. Now, this legal outcome faces being overturned by an foreign court accountable to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had received permission to commence operations. We have no clear indication how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK levied against him after the war in Ukraine. He has already initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of government’s yearly budget. Among the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that these events wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An expert on this matter described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms grasp the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That prediction has now materialised. Recently, fossil fuel and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to halt environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP