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Can you perceive our political system operates? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, international firms, and the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of business advocates. Such disputes are held in secret. Differing from national judiciaries, these panels grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open only to corporations based overseas.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, running into billions.

These sums represent not real financial harm but money the arbitrators determine the company might otherwise have made. The government may have to abandon its policy. It is hesitant to introducing similar legislation in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of disputes are being initiated, as firms take cues from each other, and investment funds finance suits in return for a share of the awards. The result? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions made by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice ruled that plans to dig the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the licence the Tories had approved. Now, this victory is under threat by an foreign court accountable to only the corporations bringing the case.

During August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the United States was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have little idea how much this could amount to. Who is representing it in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it appears probable that he will utilise the arbitration process to challenge the restrictions the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation on these grounds, seeking $16bn: an amount representing half nation's yearly income. Included in the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this topic labelled critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. Recently, oil and gas and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – government attempts to prevent climate breakdown. Firms have so far won $114bn through ISDS, of which oil majors have secured $84bn. That represents the combined GDP