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How do you reckon our political system works? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, and the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for businesses registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation represent not actual losses but funds the panel members conclude the company would perhaps have made. The government may have to rescind the measure. It becomes discouraged from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as companies take cues from each other, and private equity fund legal actions for a share of a cut of the settlements. The outcome? National sovereignty and democracy are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by legislatures is that this clause has been inserted – without democratic mandate, and often in conditions of profound opacity – into trade treaties.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first deep coalmine 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 would have no impact on climate commitments. The Labour government subsequently revoked the consent the Tories had granted. Currently, this victory is under threat by an foreign court reporting to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the court on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has previously filed a claim against another European state on these grounds, demanding a colossal sum: half that government’s yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. In 2014, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this issue described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Predictions that “once firms begin to understand the influence bestowed upon them, 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 mining firms have filed a record number of claims against nations both wealthy and developing, contesting – similar to the UK mine – official measures to halt environmental catastrophe. Firms have so far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP