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Can you understand our political system operates? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. However, that was how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, international firms, and the oligarchs who own them, can sue elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

This compensation represent not tangible damages but compensation the tribunal officials decide the company would perhaps have made. The government might be compelled to rescind the measure. It becomes discouraged from passing future laws in that area, due to the risk of being sued.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies learn from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The result? Sovereignty and democracy are becoming prohibitively expensive.

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

A Concrete Case: The Cumbrian Coal Mine

A year ago, activists won a great victory at the senior court. The judge ruled that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration later cancelled the permission the previous administration had approved. Now, this victory could be compromised by an offshore tribunal answering to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this could amount to. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half government’s yearly budget. Included in the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that these events wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has come to pass. Recently, fossil fuel and extraction companies have filed a unprecedented number of suits against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP