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Can you understand our political system operates? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals who own them, have the power to sue governments for the laws they pass, at secret arbitration panels composed of business advocates. These proceedings are held behind closed doors. Unlike our courts, these panels grant no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including companies headquartered in this country. Access is granted solely for entities based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These sums constitute not actual losses but funds the panel members conclude the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to enacting future policies in that area, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The outcome? Sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices made by parliaments is that this provision has been written – absent public approval, and often in conditions of total confidentiality – inside trade treaties.

A Specific Instance: The UK Coal Mine

A year ago, activists won a great victory at the High Court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government later cancelled the consent the previous administration had granted. Today, this success could be compromised by an foreign court accountable to no one but the corporations filing the suit.

During August, a firm whose ultimate owners are located in the tax haven lodged a claim against the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has little idea how much this sum represents. Which individual is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot the MP. The administration makes a decision, the high court upholds it, then a international entity contests it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: half that nation's yearly budget. Among the counsel on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that such things could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this matter accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were greeted by general mockery.

That threat is now a reality. This year, energy and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to stop global warming. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP