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What is your perceive our political system operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, international firms, or the billionaires who own them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. They are open exclusively to businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to drop the legislation. It is discouraged from passing future laws in that area, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being initiated, as firms observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The result? Sovereignty and democratic governance are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions made by elected bodies is that this stipulation has been inserted – without public consent, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice found that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration then withdrew the permission the previous administration had approved. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to only the entities bringing the case.

Last August, a company whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no idea how much this sum represents. Who is representing it challenging the UK administration? A member of parliament, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Case

On the same day that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has filed a claim against another European state with similar intent, demanding $16bn: half that nation's yearly income. Among the counsel representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Costs

Politicians promised that such things could not occur. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms grasp the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That prediction has now materialised. In the current period, energy and resource corporations have initiated a record number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP