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What is your perceive our political system operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue governments for the regulations they pass, at private courts staffed by business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies headquartered in this country. The door is open solely for entities registered abroad.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not real financial harm but funds the panel members conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the awards. The consequence? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings made by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under conditions of profound opacity – into international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer found that schemes to open the first deep coalmine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the former government had approved. Today, this success is under threat by an foreign court accountable to no one but the corporations bringing the case.

Last August, a corporate entity whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it seems likely that he will utilise the tribunal to contest the sanctions the UK imposed on him following the war in Ukraine. He has started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's annual revenue. Part of the legal team representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Costs

We were assured that such things were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this topic labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms start to realise the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with scepticism.

That prediction has come to pass. This year, oil and gas and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP