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How do you understand our system of government works? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is maintained by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, and the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at private courts composed of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I cannot take a case to them, just as our government, including companies operating from this country. They are open solely for entities operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company might otherwise have made. The government may have to drop the legislation. It is discouraged from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being brought, as companies learn from each other, and hedge funds finance suits in return for a cut of the takings. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices taken by elected bodies is that this provision has been written – without public consent, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the licence the Tories had approved. Currently, this legal outcome is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

Last August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the United States was established to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to go ahead. The public has no idea how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The administration passes a law, the domestic court validates it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the court on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK imposed on him after the war in Ukraine. He has previously filed a claim against a small nation on these grounds, demanding a colossal sum: half that nation's yearly income. Part of the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this issue described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning is now a reality. This year, energy and extraction companies have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – similar to the UK mine – official measures to stop global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP