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Can you perceive our political system functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. Not anymore.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, and the oligarchs who own them, have the power to sue nation states for the regulations they pass, at private courts composed of business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. They are open only to corporations registered abroad.

Should an arbitration panel rules that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums represent not actual losses but compensation the tribunal officials determine the company could potentially have made. The government could be forced to rescind the measure. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as companies take cues from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The consequence? National sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices taken by legislatures is that this clause has been inserted – absent public approval, and typically amid a climate of profound opacity – into trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge determined that proposals to dig the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Currently, this victory could be compromised by an secret arbitration panel reporting to exclusively the companies bringing the case.

Last August, a firm whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The government passes a law, the national judiciary validates it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal 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 little of the case to date, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has started suing another European state on these grounds, claiming a colossal sum: an amount representing half government’s annual revenue. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these events could not occur. Years ago, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An expert on this topic accused campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms begin to understand the influence they now possess, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has come to pass. In the current period, oil and gas and extraction companies have filed a unprecedented number of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP