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What is your perceive our political system operates? It could be along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including companies operating from this country. The door is open exclusively to entities based overseas.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company might otherwise have made. The administration could be forced to drop the legislation. It becomes discouraged from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as firms learn from each other, and investment funds bankroll lawsuits in return for a share of the awards. The outcome? Sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions enacted by legislatures is that this stipulation has been inserted – without public consent, and frequently under conditions of profound opacity – within trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government then withdrew the permission the former government had granted. Now, this victory could be compromised by an foreign court answering to no one but the companies petitioning it.

During August, a firm whose ultimate owners are located in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in Washington DC was set up to hear it.

The company is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The state passes a law, the high court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case so far, but it appears probable that he may employ the arbitration process to fight the restrictions the UK levied against him following the invasion of Ukraine. He has started suing another European state for this reason, demanding $16bn: an amount representing half government’s annual revenue. Included in the legal team on his side? a prominent lawyer, married to the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as security for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

We were assured that these scenarios were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this issue described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That threat has come to pass. In the current period, energy and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to prevent global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP