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What is your reckon our political system operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, or the wealthy individuals who own them, are able to litigate against elected administrations for the policies they pass, at private courts made up of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including enterprises operating from this country. They are open exclusively to entities operating from foreign soil.

If a tribunal finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

This compensation constitute not real financial harm but money the panel members decide the company would perhaps have made. The state might be compelled to drop the legislation. It is hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms take cues from each other, and hedge funds fund legal actions in return for a portion of the awards. The result? National sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions made by elected bodies is that this provision has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration then withdrew the permission the former government had approved. Today, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the corporations filing the suit.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in the US capital was established to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this sum represents. What legal team is representing it in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the high court upholds it, then a international entity contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has already started suing Luxembourg with similar intent, demanding a colossal sum: equivalent to half of state's yearly income. Part of the lawyers on his side? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat is now a reality. In the current period, energy and extraction companies have initiated a unprecedented number of cases against nations rich and poor, opposing – as in the case of the UK mine – government attempts to halt environmental catastrophe. Firms have to date won vast sums by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP