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What is your understand our political system functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, and the billionaires who own them, can sue governments for the regulations they pass, at private courts staffed by business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these panels allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to entities operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but funds the tribunal officials conclude the company could potentially have made. The state could be forced to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about being sued.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as firms learn from each other, and private equity fund legal actions in return for a cut of the settlements. The consequence? Sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions made by legislatures is that this clause has been written – absent public approval, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge ruled that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The new government later cancelled the consent the Tories had approved. Today, this success is under threat by an offshore tribunal reporting to no one but the companies bringing the case.

During August, a firm whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to proceed. We have no clear indication how much this sum represents. Who is representing it in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a foreign company contests it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it seems likely that he’ll use the arbitration process to fight the penalties the UK enacted against him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, claiming $16bn: an amount representing half government’s yearly income. Among the legal team representing him there? a prominent lawyer, married to the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that these scenarios could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An expert on this issue accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have filed a historic level of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to prevent global warming. Companies have thus far won vast sums via ISDS, of which oil majors have been awarded the majority. That represents the combined GDP