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Can you understand our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, and the billionaires that control them, have the power to sue nation states for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. They are open solely for entities operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order compensation of vast sums, running into billions.

These sums constitute not real financial harm but compensation the panel members conclude the company would perhaps have made. The state might be compelled to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and private equity fund legal actions for a share of a cut of the awards. The outcome? Sovereignty and popular rule are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices made by legislatures is that this provision has been incorporated – without public consent, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration later cancelled the permission the former government had granted. Now, this legal outcome could be compromised by an secret arbitration panel answering to no one but the corporations filing the suit.

Last August, a firm whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case so far, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the legal team on his side? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states might be preventing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An adviser on this topic described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “when companies start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That warning is now a reality. Recently, energy and resource corporations have initiated a historic level of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP