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What is your understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, along with the billionaires that control them, have the power to sue elected administrations for the policies they pass, at private courts staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to businesses registered abroad.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These sums represent not actual losses but money the panel members decide the company might otherwise have made. The state might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms observe each other, and hedge funds fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by elected bodies is that this stipulation has been inserted – absent public approval, and often in a climate of total confidentiality – within bilateral investment treaties.

A Specific Example: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The justice determined that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no consequence on national carbon targets. The new government then withdrew the permission the previous administration had approved. Today, this legal outcome could be compromised by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a firm whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. We have little idea how much this could amount to. Who is serving as its counsel challenging the state? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK enacted against him following the invasion of Ukraine. He has already started suing another European state with similar intent, demanding $16bn: half that state's yearly budget. Part of the counsel on his side? a prominent lawyer, married to the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Costs

The public was told that these events wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An expert on this matter accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has come to pass. In the current period, fossil fuel and mining firms have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP