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What is your perceive our system of government works? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that used to be how it used to work. No longer.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the billionaires that control them, can sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held in secret. Differing from national judiciaries, these panels allow no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, including enterprises based in this country. The door is open solely for entities registered abroad.

Should an arbitration panel finds that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but compensation the tribunal officials decide the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation along the same lines, worried about being sued.

A System Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and private equity finance suits in return for a share of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings taken by elected bodies is that this provision has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Concrete Case: The Cumbrian Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration later cancelled the consent the previous administration had granted. Now, this success faces being overturned by an offshore tribunal answering to exclusively the entities filing the suit.

In August, a company whose ultimate owners are located in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Which individual is serving as its counsel against the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK imposed on him following the war in Ukraine. He has previously started suing a small nation on these grounds, seeking $16bn: half that state's yearly budget. Included in the lawyers on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that these events were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this topic described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms start to realise the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – official measures to prevent climate breakdown. Companies have so far won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP