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What is your reckon our political system works? Maybe something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, and the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by business advocates. The cases take place in secret. In contrast to domestic courts, these panels grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even companies based in this country. The door is open exclusively to entities based overseas.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but funds the panel members decide the company could potentially have made. The state might be compelled to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being filed, as corporations take cues from each other, and private equity fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions made by legislatures is that this provision has been incorporated – without public consent, and often in an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Last year, activists secured a significant win at the senior court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The new government subsequently revoked the licence the Tories had granted. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations filing the suit.

In August, a company whose final controllers are located in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had been permitted to go ahead. We have little idea how much this sum represents. What legal team is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot the MP. The government enacts a policy, the high court validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking a colossal sum: half that state's yearly income. Among the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the influence bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were met with general mockery.

That prediction has now materialised. Recently, oil and gas and mining firms have lodged a historic level of cases against nations rich and poor, opposing – like the example of the Whitehaven project – government attempts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP