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Can you reckon our system of government operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue governments for the laws they pass, at private courts made up of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. They are open solely for entities registered abroad.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These sums are based not on actual losses but money the panel members conclude the company would perhaps have made. The administration could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, worried about facing litigation.

A System Running Rampant

Record numbers of cases are being brought, as companies learn from each other, and private equity fund legal actions in return for a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions enacted by legislatures is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer found that plans to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the licence the former government had approved. Today, this legal outcome faces being overturned by an foreign court answering to only the corporations bringing the case.

During August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this could amount to. Who is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it appears probable that he may employ the tribunal to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has started suing another European state on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that such things could not occur. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That warning is now a reality. In the current period, fossil fuel and mining firms have filed a unprecedented number of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have so far won $114bn through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP