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What is your understand our system of government functions? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. However, that was how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, including enterprises headquartered in this country. The door is open solely for entities registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but money the tribunal officials conclude the company might otherwise have made. The administration could be forced to rescind the measure. It will be discouraged from enacting future policies along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of disputes are being brought, as companies observe each other, and hedge funds fund legal actions for a share of a cut of the settlements. The result? Democratic sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions enacted by parliaments is that this stipulation has been written – absent public approval, and often in a climate of profound opacity – within bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer found that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government then withdrew the licence the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

This firm is suing the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the state? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary validates it, then a foreign company challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has initiated proceedings against another European state on these grounds, demanding sixteen billion dollars: half that state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these scenarios could not occur. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter described critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations start to realise the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with scepticism.

That prediction has now materialised. This year, oil and gas and extraction companies have initiated a historic level of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have to date won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP