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Can you reckon our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, or the oligarchs that control them, are able to litigate against governments for the laws they pass, at private courts composed of commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open exclusively to entities registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it may order compensation of vast sums, even billions.

These awards represent not actual losses but money the panel members determine the company could potentially have made. The state may have to abandon its policy. It becomes hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations learn from each other, and investment funds finance suits in return for a cut of the takings. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings made by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – into trade treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that proposals to open the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on climate commitments. The new government subsequently revoked the licence the previous administration had issued. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the United States was convened to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Who is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him following the war in Ukraine. He has already initiated proceedings against a small nation for this reason, seeking a colossal sum: equivalent to half of government’s yearly income. Included in the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this issue labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That prediction has now materialised. This year, energy and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Firms have so far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP