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How do you understand our political system operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that’s how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue governments for the regulations they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Unlike our courts, these panels grant no right of appeal or legal review. The general public cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but money the tribunal officials conclude the company would perhaps have made. The administration may have to abandon its policy. It becomes hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A System Running Rampant

Historically high figures of legal actions are being filed, as corporations observe each other, and private equity fund legal actions for a share of a portion of the awards. The consequence? Democratic sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings taken by legislatures is that this clause has been written – without public consent, and typically amid a climate of extreme secrecy – into international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge found that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the consent the former government had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

Last August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

This firm is litigating against the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

On the same day that the court on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him following the Russian aggression. He has already initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team acting for him in that case? Cherie Blair, married to the previous PM.

Legal experts contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this issue labelled campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP