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What is your perceive our political system operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Legislation are enforced by the courts. That's it. Well, that used to be how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, and the oligarchs that control them, are able to litigate against nation states for the policies they pass, at private courts composed of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these panels grant 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 companies operating from this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but money the panel members conclude the company would perhaps have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the choices taken by parliaments is that this clause has been incorporated – without public consent, and typically amid conditions of profound opacity – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice found that schemes to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The new government then withdrew the licence the former government had approved. Today, this victory faces being overturned by an foreign court accountable to exclusively the entities petitioning it.

During August, a company whose ultimate owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he may employ the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has previously started suing Luxembourg with similar intent, claiming sixteen billion dollars: half that state's yearly budget. Included in the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that these events could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That threat is now a reality. In the current period, fossil fuel and mining firms have filed a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have to date won $114bn via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP