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How do you perceive our political system works? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, or the billionaires that control them, have the power to sue governments for the policies they pass, at private courts made up of business advocates. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open solely for businesses operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These awards represent not real financial harm but funds the arbitrators determine the company would perhaps have made. The administration could be forced to drop the legislation. It is hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings taken by elected bodies is that this stipulation has been inserted – absent public approval, and often in conditions of extreme secrecy – into international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the senior court. The judge determined that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the consent the previous administration had approved. Now, this victory could be compromised by an offshore tribunal answering to only the corporations petitioning it.

Last August, a company whose final controllers are based in the tax haven lodged a claim against the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Which individual is representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The state enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming a colossal sum: equivalent to half of nation's yearly income. Part of the lawyers representing him there? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that these scenarios could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this topic labelled activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. This year, oil and gas and mining firms have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have so far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP