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Can you perceive our political system works? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes take place in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted only to corporations operating from foreign soil.

When a secret court rules that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The government could be forced to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being brought, as companies learn from each other, and private equity bankroll lawsuits in exchange for a share of the awards. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices taken by elected bodies is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The presiding officer determined that schemes to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the licence the Tories had granted. Currently, this success could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

During August, a company whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Last week a arbitration panel in the United States was set up to consider the case.

This firm is suing the UK for the profits it might have made if the mine had been permitted to proceed. We have little idea how much this could amount to. Who is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an secretive private court, and a elected official works for its behalf.

A Sanctions Challenge

Concurrently that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK imposed on him following the war in Ukraine. He has already started suing Luxembourg for this reason, claiming a colossal sum: half that government’s yearly income. Included in the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these scenarios were not possible. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An adviser on this issue accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a record number of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to halt global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP