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What is your reckon our system of government functions? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, and the billionaires who own them, have the power to sue governments for the regulations they pass, at private courts staffed by business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open exclusively to businesses based overseas.

When a secret court rules that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards constitute not tangible damages but money the arbitrators conclude the company might otherwise have made. The state might be compelled to drop the legislation. It is discouraged from enacting future policies in that area, worried about being sued.

A Process Growing Exponentially

Record numbers of cases are being initiated, as corporations observe each other, and hedge funds finance suits for a share of a cut of the awards. The consequence? National sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the rulings made by parliaments is that this clause has been written – without democratic mandate, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Concrete Example: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The judge ruled that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the permission the former government had granted. Currently, this victory is under threat by an offshore tribunal answering to no one but the corporations petitioning it.

In August, a company whose beneficial owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the United States was established to hear it.

The claimant is suing the UK for the profits it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The government enacts a policy, the domestic court supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it seems likely that he may employ the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: half that state's yearly income. Part of the legal team representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that these scenarios were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “once firms grasp the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That warning has come to pass. Recently, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That represents the combined GDP