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How do you reckon our system of government operates? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, international firms, along with the oligarchs that control them, can sue nation states for the laws they pass, at private courts staffed by corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open only to entities operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but money the panel members conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations take cues from each other, and investment funds finance suits in return for a share of the settlements. The consequence? Sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings enacted by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The justice determined that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the licence the Tories had issued. Now, this success faces being overturned by an foreign court accountable to only the companies bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

This firm is litigating against the UK for the money it might have made if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is representing it in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he may employ the tribunal to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the counsel representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Risks

Politicians promised that these scenarios could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the power they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning is now a reality. Recently, energy and resource corporations have initiated a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have thus far won $114bn through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP