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How do you perceive our political system functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Rise of Shadow Tribunals

Nowadays, international firms, or the billionaires who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held in secret. Unlike our courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. Access is granted only to entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of vast sums, running into billions.

These sums represent not tangible damages but money the tribunal officials conclude the company might otherwise have made. The administration may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as companies learn from each other, and investment funds fund legal actions in exchange for a cut of the awards. The consequence? National sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The incoming administration then withdrew the consent the former government had granted. Now, this success is under threat by an offshore tribunal reporting to only the corporations bringing the case.

During August, a firm whose final controllers are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him following the Russian aggression. He has filed a claim against a small nation with similar intent, claiming a colossal sum: an amount representing half state's yearly income. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Legal experts argue that the EU’s hesitation in using frozen state funds as security for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these events could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms grasp the power they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That prediction is now a reality. In the current period, oil and gas and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP