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How do you understand our system of government functions? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including enterprises operating from this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but funds the panel members decide the company would perhaps have made. The state may have to abandon its policy. It becomes discouraged from passing future laws along the same lines, worried about being sued.

A System Running Rampant

Unprecedented levels of cases are being initiated, as companies take cues from each other, and private equity finance suits in return for a cut of the awards. The consequence? National sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings made by parliaments is that this stipulation has been written – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the consent the Tories had approved. Today, this victory is under threat by an offshore tribunal answering to only the entities bringing the case.

In August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is serving as its counsel in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it appears probable that he may employ the tribunal to contest the penalties the UK imposed on him following the Russian aggression. He has filed a claim against another European state with similar intent, claiming a colossal sum: an amount representing half state's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen state funds as security for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. Previously, a former prime minister, advocating for the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement upon trade deal and there has not been a case in the past.” A consultant on this matter described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies start to realise the power they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP