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How do you perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, international firms, or the oligarchs who own them, can sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open exclusively to corporations registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it can award compensation of hundreds of millions, potentially billions.

This compensation represent not tangible damages but compensation the panel members determine the company could potentially have made. The government might be compelled to drop the legislation. It is hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being brought, as companies observe each other, and investment funds bankroll lawsuits in return for a cut of the takings. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices made by legislatures is that this stipulation has been written – absent public approval, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had issued. Currently, this success is under threat by an foreign court accountable to exclusively the entities bringing the case.

During August, a company whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. We have little idea how much this might be. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case at present, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, seeking sixteen billion dollars: half that state's annual revenue. Part of the counsel on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these events wouldn’t happen. Years ago, a former prime minister, promoting the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter accused activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That threat has come to pass. Recently, fossil fuel and extraction companies have initiated a historic level of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to stop global warming. Companies have so far won $114bn via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP