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What is your reckon our political system functions? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, or the oligarchs behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases are held away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open exclusively to corporations based overseas.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it may order damages of vast sums, potentially billions.

These sums represent not actual losses but funds the arbitrators determine the company could potentially have made. The government could be forced to abandon its policy. It is hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as firms observe each other, and investment funds fund legal actions for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices made by legislatures is that this provision has been written – without democratic mandate, and often in conditions of profound opacity – into trade treaties.

A Real-World Case: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The judge found that plans to dig the first new deep coal mine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government later cancelled the consent the Tories had approved. Now, this legal outcome faces being overturned by an foreign court answering to only the corporations petitioning it.

Last August, a company whose beneficial owners reside in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the United States was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to proceed. We have little idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government enacts a policy, the national judiciary upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case at present, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK enacted against him after the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: half that state's yearly income. Among the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that such things wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies grasp the power they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. This year, energy and extraction companies have lodged a record number of suits against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP