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How do you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, and the billionaires that control them, can sue elected administrations for the regulations they pass, at private courts made up of corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these tribunals grant no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including businesses operating from this country. The door is open exclusively to entities based overseas.

If a tribunal finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on tangible damages but compensation the tribunal officials decide the company might otherwise have made. The state could be forced to rescind the measure. It is hesitant to enacting future policies of a similar nature, worried about being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the choices taken by legislatures is that this stipulation has been written – without democratic mandate, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on climate commitments. The incoming administration later cancelled the licence the former government had approved. Now, this legal outcome could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Which individual is representing it against the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the high court validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation on these grounds, demanding sixteen billion dollars: an amount representing half state's yearly income. Among the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these scenarios were not possible. Previously, a former prime minister, championing the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” An adviser on this topic described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations grasp the authority they now possess, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to prevent global warming. Companies have so far won $114bn via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP