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Can you understand our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

Today, international firms, along with the wealthy individuals that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of corporate lawyers. The cases are held behind closed doors. Differing from national judiciaries, these panels provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but compensation the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It is deterred from passing future laws of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations learn from each other, and investment funds finance suits in exchange for a portion of the awards. The result? National sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge determined that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration subsequently revoked the consent the former government had issued. Today, this legal outcome faces being overturned by an foreign court answering to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. We have no clear indication how much this could amount to. Who is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company challenges it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, claiming a colossal sum: equivalent to half of state's annual revenue. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

Politicians promised that these scenarios could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction has now materialised. This year, energy and extraction companies have lodged a historic level of cases against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to halt environmental catastrophe. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP