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How do you reckon our political system operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs who own them, can sue nation states for the policies they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to entities based overseas.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but money the arbitrators decide the company would perhaps have made. The administration may have to abandon its policy. It becomes discouraged from passing future laws along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – within international trade agreements.

A Specific Example: The UK Coalmine

Last year, activists secured a significant win at the senior court. The justice determined that proposals to open the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the consent the former government had granted. Currently, this victory is under threat by an foreign court answering to exclusively the corporations bringing the case.

During August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in the US capital was convened to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this could amount to. Which individual is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half nation's yearly budget. Among the legal team on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An adviser on this topic labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “as corporations grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a record number of claims against nations rich and poor, contesting – similar to the UK mine – state efforts to stop climate breakdown. Firms have thus far won $114bn through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP