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Can you understand our system of government works? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that was how it used to work. No longer.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the billionaires who own them, can sue elected administrations for the regulations they pass, at private courts composed of business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards represent not real financial harm but money the arbitrators decide the company could potentially have made. The government could be forced to abandon its policy. It is deterred from enacting future policies of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds finance suits for a share of a portion of the awards. The outcome? Sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions made by elected bodies is that this provision has been incorporated – absent public approval, and often in a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge found that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had issued. Today, this victory is under threat by an foreign court accountable to exclusively the entities petitioning it.

Last August, a company whose final controllers are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no idea how much this might be. Which individual is serving as its counsel challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity contests it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK imposed on him following the war in Ukraine. He has started suing Luxembourg for this reason, claiming $16bn: half that government’s annual revenue. Part of the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An expert on this topic accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were met with widespread derision.

That prediction has now materialised. Recently, energy and extraction companies have initiated a record number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP