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How do you reckon our system of government operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, or the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of business advocates. The cases are conducted in secret. Differing from national judiciaries, these bodies grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including businesses headquartered in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but money the panel members determine the company would perhaps have made. The administration could be forced to abandon its policy. It will be deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being brought, as companies learn from each other, and private equity bankroll lawsuits for a share of a share of the takings. The consequence? Sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions made by elected bodies is that this provision has been incorporated – without public consent, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Now, this success is under threat by an secret arbitration panel reporting to no one but the companies filing the suit.

During August, a company whose final controllers are located in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is representing it challenging the British government? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The government enacts a policy, the national judiciary upholds it, then a international entity challenges it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the restrictions the UK levied against him following the Russian aggression. He has previously filed a claim against another European state for this reason, seeking a colossal sum: equivalent to half of government’s yearly income. Part of the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a issue in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That threat has come to pass. This year, oil and gas and resource corporations have initiated a historic level of cases against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have thus far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP