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What is your perceive our political system operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, or the oligarchs who own them, can sue nation states for the regulations they pass, at private courts composed of commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the panel members conclude the company would perhaps have made. The state may have to drop the legislation. It will be discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The justice ruled that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on national carbon targets. The Labour government later cancelled the consent the former government had approved. Today, this success is under threat by an foreign court answering to no one but the corporations bringing the case.

During August, a company whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in Washington DC was set up to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it is highly possible that he will utilise the arbitration process to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has started suing a small nation with similar intent, claiming sixteen billion dollars: an amount representing half nation's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s delay in utilising seized Russian assets as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these events wouldn’t happen. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about such legal actions. Predictions that “when companies begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That warning is now a reality. This year, energy and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP