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Can you perceive our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, international firms, along with the billionaires behind them, have the power to sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel rules that a law or policy may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

These sums are based not on tangible damages but funds the panel members determine the company might otherwise have made. The administration may have to rescind the measure. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions for a share of a share of the settlements. The consequence? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions made by parliaments is that this clause has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the High Court. The presiding officer determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on national carbon targets. The Labour government later cancelled the consent the Tories had granted. Currently, this victory faces being overturned by an foreign court answering to no one but the entities filing the suit.

During August, a corporate entity whose final controllers reside in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. The public has no idea how much this sum represents. What legal team is acting on its behalf challenging the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a international entity disputes it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Challenge

Concurrently that the court on the coalmine case was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK levied against him after the invasion of Ukraine. He has already filed a claim against a small nation on these grounds, seeking sixteen billion dollars: equivalent to half of state's yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios were not possible. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That threat has now materialised. This year, fossil fuel and resource corporations have initiated a record number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Companies have to date won $114bn by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP