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What is your reckon our system of government works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, or the oligarchs that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even companies based in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation represent not actual losses but money the panel members determine the company could potentially have made. The administration could be forced to drop the legislation. It becomes discouraged from passing future laws along the same lines, worried about being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as corporations learn from each other, and private equity fund legal actions in return for a share of the awards. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices taken by parliaments is that this stipulation has been inserted – without public consent, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Real-World Example: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice determined that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The new government subsequently revoked the consent the former government had granted. Currently, this victory is under threat by an foreign court reporting to only the corporations bringing the case.

Last August, a company whose final controllers are based in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it appears probable that he will utilise the tribunal to challenge the penalties the UK levied against him following the Russian aggression. He has started suing a small nation with similar intent, demanding a colossal sum: equivalent to half of state's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s procrastination in using frozen state funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these scenarios could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms start to realise the influence they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That warning has come to pass. Recently, energy and resource corporations have initiated a record number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt global warming. Companies have to date won $114bn by using ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP