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What is your understand our system of government operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it used to work. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, and the oligarchs who own them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises based in this country. They are open only to businesses registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The state may have to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by parliaments is that this clause has been written – without democratic mandate, and typically amid a climate of total confidentiality – inside international trade agreements.

A Concrete Example: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The new government then withdrew the licence the Tories had issued. Now, this victory faces being overturned by an offshore tribunal reporting to only the companies filing the suit.

Last August, a company whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was convened to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that such things were not possible. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this issue labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms start to realise the influence bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with general mockery.

That threat has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, opposing – similar to the UK mine – state efforts to halt global warming. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP