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Can you reckon our political system operates? It could be similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the billionaires who own them, have the power to sue elected administrations for the policies they pass, at private courts made up of business advocates. Such disputes take place in secret. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. Access is granted exclusively to entities based overseas.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it may order compensation of vast sums, running into billions.

These sums are based not on actual losses but compensation the arbitrators determine the company would perhaps have made. The government could be forced to rescind the measure. It is deterred from enacting future policies of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being filed, as firms observe each other, and private equity finance suits for a share of a share of the takings. The outcome? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the decisions enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Case: The UK Coalmine

A year ago, activists secured a significant win at the senior court. The justice determined that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the former government had granted. Now, this success could be compromised by an secret arbitration panel reporting to only the companies petitioning it.

During August, a company whose final controllers are located in the tax haven filed a lawsuit versus the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the money it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this might be. What legal team is serving as its counsel challenging the state? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he may employ the tribunal to fight the sanctions the UK enacted against him after the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, seeking sixteen billion dollars: equivalent to half of nation's yearly income. Part of the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that such things were not possible. Previously, a government leader, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat has now materialised. Recently, energy and extraction companies have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP