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What is your understand our system of government works? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

Today, overseas companies, along with the oligarchs that control them, can sue governments for the policies they pass, at private courts composed of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards represent not real financial harm but compensation the arbitrators determine the company would perhaps have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as corporations learn from each other, and hedge funds fund legal actions in return for a share of the settlements. The outcome? National sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions made by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – inside international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that schemes to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government later cancelled the licence the former government had granted. Today, this success could be compromised by an secret arbitration panel accountable to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: an amount representing half state's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this topic accused critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Warnings that “when companies begin to understand the influence they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That threat has now materialised. Recently, oil and gas and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP