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Can you reckon our system of government functions? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. However, that was how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, foreign corporations, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these bodies allow no right of appeal or legal review. 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 businesses registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not real financial harm but funds the arbitrators conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in return for a share of the awards. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices enacted by parliaments is that this stipulation has been written – without democratic mandate, and often in conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the high court. The justice determined that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the permission the Tories had granted. Today, this victory is under threat by an secret arbitration panel reporting to no one but the entities filing the suit.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was convened to hear it.

This firm is suing the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation contests it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him following the Russian aggression. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: an amount representing half nation's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these scenarios could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this matter labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies start to realise the authority they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That warning has now materialised. This year, oil and gas and mining firms have lodged a record number of suits against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to halt environmental catastrophe. Companies have so far won vast sums through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP