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How do you understand our political system works? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are conducted in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, including enterprises based in this country. The door is open solely for entities based overseas.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it can award damages of vast sums, running into billions.

These sums constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Growing Exponentially

Record numbers of cases are being initiated, as firms observe each other, and hedge funds finance suits in exchange for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the permission the previous administration had granted. Today, this success faces being overturned by an secret arbitration panel accountable to exclusively the corporations bringing the case.

Last August, a firm whose ultimate owners are located in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. What legal team is representing it in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the high court supports it, then a international entity disputes it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has already started suing Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the lawyers on his side? a prominent lawyer, married to the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that these events wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed trade agreement upon trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has now materialised. Recently, oil and gas and resource corporations have initiated a historic level of cases against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to prevent climate breakdown. Companies have to date won vast sums via ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP