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How do you perceive our political system operates? It could be something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it once functioned. Those days are over.

The Rise of Shadow Tribunals

Nowadays, international firms, along with the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted only to corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation are based not on actual losses but money the panel members conclude the company might otherwise have made. The administration may have to abandon its policy. It is discouraged from passing future laws of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and investment funds bankroll lawsuits in return for a share of the takings. The result? Democratic sovereignty and democracy are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices enacted by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The presiding officer determined that schemes to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had approved. Today, this victory could be compromised by an foreign court answering to only the corporations petitioning it.

During August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. Who is representing it challenging the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a international entity challenges it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he’ll use the tribunal to fight the restrictions the UK enacted against him after the Russian aggression. He has already started suing a small nation on these grounds, claiming sixteen billion dollars: half that government’s annual revenue. Part of the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that these scenarios could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning is now a reality. In the current period, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP