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What is your understand our system of government functions? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. End of story. However, that used to be how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, along with the billionaires that control them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums constitute not tangible damages but compensation the tribunal officials decide the company would perhaps have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as companies take cues from each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and often in a climate of profound opacity – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The presiding officer found that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The new government then withdrew the permission the previous administration had issued. Today, this victory could be compromised by an secret arbitration panel reporting to only the corporations petitioning it.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a tribunal in the US capital was set up to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. Who is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a foreign company disputes it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it seems likely that he may employ the arbitration process to fight the restrictions the UK enacted against him following the Russian aggression. He has started suing another European state with similar intent, claiming a colossal sum: an amount representing half state's yearly income. Included in the legal team on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Predictions that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were greeted by general mockery.

That warning is now a reality. In the current period, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to stop climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP