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How do you understand our political system works? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

Today, overseas companies, and the billionaires behind them, can sue governments for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or legal review. The general public are unable to file a case to them, just as our government, including enterprises operating from this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

This compensation constitute not tangible damages but money the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It will be deterred from passing future laws of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as companies learn from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The result? National sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings taken by legislatures is that this stipulation has been written – without democratic mandate, and often in conditions of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists won a great victory at the high court. The presiding officer found that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on climate commitments. The new government then withdrew the consent the former government had issued. Today, this success faces being overturned by an offshore tribunal accountable to no one but the corporations petitioning it.

In August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim versus the UK government. Last week a tribunal in the United States was set up to hear it.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

Legal experts believe that the EU’s delay in using frozen Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these events could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this topic described campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and mining firms have initiated a record number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP