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How do you reckon our political system functions? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Rise of Shadow Tribunals

In the modern era, international firms, along with the billionaires who own them, have the power to sue nation states for the policies they pass, at private courts made up of commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these bodies allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to entities registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but funds the arbitrators determine the company might otherwise have made. The administration could be forced to drop the legislation. It will be deterred from passing future laws along the same lines, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms take cues from each other, and hedge funds finance suits in return for a share of the awards. The result? National sovereignty and popular rule are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices enacted by elected bodies is that this provision has been written – without public consent, and typically amid a climate of total confidentiality – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the senior court. The presiding officer determined that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the licence the former government had issued. Now, this victory is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Last week a tribunal 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 received permission to go ahead. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the restrictions the UK imposed on him after the Russian aggression. He has filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that state's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that such things wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An expert on this topic labelled activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms grasp the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has now materialised. In the current period, energy and resource corporations have lodged a record number of suits against nations both wealthy and developing, opposing – similar to the UK mine – official measures to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP