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What is your understand our system of government functions? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

In the modern era, international firms, along with the billionaires behind them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. Such disputes take place in secret. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, including companies operating from this country. Access is granted solely for entities operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

This compensation are based not on actual losses but compensation the tribunal officials decide the company could potentially have made. The government may have to abandon its policy. It becomes deterred from enacting future policies of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies observe each other, and private equity bankroll lawsuits in return for a cut of the takings. The outcome? Democratic sovereignty and popular rule are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices made by elected bodies is that this provision has been incorporated – without public consent, and frequently under a climate of extreme secrecy – within trade treaties.

A Real-World Instance: The UK Coalmine

A year ago, a conservation group won a great victory at the high court. The judge determined that proposals to open the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have no consequence on climate commitments. The Labour government then withdrew the consent the previous administration had granted. Today, this success could be compromised by an secret arbitration panel reporting to exclusively the corporations bringing the case.

Last August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary validates it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that state's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that such things could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “when companies grasp the authority they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That warning has now materialised. Recently, energy and mining firms have filed a historic level of suits against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP