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What is your understand our system of government works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes are held in secret. Unlike our courts, these panels allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. They are open only to entities operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies observe each other, and hedge funds finance suits for a share of a cut of the settlements. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings made by elected bodies is that this stipulation has been written – without public consent, and frequently under an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge found that schemes to open the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on national carbon targets. The new government subsequently revoked the permission the previous administration had granted. Today, this legal outcome is under threat by an offshore tribunal reporting to exclusively the entities petitioning it.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a foreign company contests it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK levied against him after the war in Ukraine. He has previously filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that state's annual revenue. Included in the legal team representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that these events were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “once firms start to realise the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That warning has come to pass. In the current period, fossil fuel and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have to date won vast sums through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP