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How do you understand our political system functions? Perhaps something like this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the oligarchs who own them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation represent not real financial harm but funds the tribunal officials decide the company might otherwise have made. The administration may have to rescind the measure. It will be discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as corporations observe each other, and hedge funds finance suits in return for a share of the takings. The result? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the choices made by elected bodies is that this clause has been written – absent public approval, and often in conditions of profound opacity – into international trade agreements.

A Specific Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The judge determined that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The Labour government then withdrew the permission the Tories had approved. Today, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the corporations filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Who is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it seems likely that he’ll use the arbitration process to fight the penalties the UK levied against him following the Russian aggression. He has already filed a claim against Luxembourg for this reason, claiming a colossal sum: half that nation's annual revenue. Among the counsel on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios could not occur. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” An expert on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with widespread derision.

That warning is now a reality. This year, oil and gas and mining firms have filed a unprecedented number of claims against nations rich and poor, opposing – like the example of the Whitehaven project – official measures to halt climate breakdown. Firms have so far won vast sums by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP