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How do you understand our system of government operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that was how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, along with the oligarchs who own them, can sue elected administrations for the policies they pass, at private courts staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open solely for businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company would perhaps have made. The state may have to drop the legislation. It will be discouraged from passing future laws in that area, for fear of being sued.

A Process Growing Exponentially

Record numbers of cases are being filed, as companies learn from each other, and investment funds finance suits for a share of a cut of the takings. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions enacted by elected bodies is that this stipulation has been written – without democratic mandate, and often in an atmosphere of total confidentiality – into bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that proposals to dig the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The new government then withdrew the licence the Tories had granted. Now, this legal outcome could be compromised by an foreign court answering to no one but the companies filing the suit.

During August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had received permission to go ahead. The public has little idea how much this could amount to. Which individual is representing it against the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of state's annual revenue. Included in the legal team representing him there? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

Politicians promised that these events wouldn’t happen. In 2014, a government leader, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An expert on this matter described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about 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 wealthy nations” were dismissed with general mockery.

That prediction is now a reality. Recently, oil and gas and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to stop climate breakdown. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP