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What is your understand our political system works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Today, international firms, and the oligarchs behind them, have the power to sue nation states for the laws they pass, at private courts staffed by business advocates. The cases are held behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies based in this country. The door is open only to entities based overseas.

When a secret court rules that a government measure could harm the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

These awards are based not on tangible damages but funds the panel members determine the company would perhaps have made. The government could be forced to drop the legislation. It becomes discouraged from enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as firms learn from each other, and hedge funds finance suits in return for a share of the takings. The consequence? National sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been written – absent public approval, and typically amid conditions of total confidentiality – inside international trade agreements.

A Real-World Example: The Cumbrian Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge determined that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had issued. Today, this success faces being overturned by an offshore tribunal reporting to no one but the companies filing the suit.

Last August, a firm whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in the US capital was convened to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have no idea how much this might be. Who is serving as its counsel against the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing another European state on these grounds, claiming a colossal sum: equivalent to half of nation's yearly income. Included in the counsel representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that such things were not possible. Previously, a government leader, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An expert on this topic labelled critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That prediction has now materialised. In the current period, oil and gas and mining firms have filed a historic level of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP