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How do you perceive our political system functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses based in this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards constitute not actual losses but funds the tribunal officials conclude the company could potentially have made. The administration may have to abandon its policy. It is discouraged from enacting future policies along the same lines, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as companies observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The result? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions taken by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Last year, activists won a great victory at the senior court. The justice ruled that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government then withdrew the permission the former government had issued. Today, this victory is under threat by an foreign court accountable to only the entities filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is representing it against the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The state passes a law, the high court supports it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it seems likely that he will utilise the tribunal to fight the restrictions the UK imposed on him after the Russian aggression. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this topic described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has come to pass. Recently, energy and mining firms have lodged a record number of suits against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to halt global warming. Corporations have to date won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP