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Can you perceive our political system functions? It could be along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

Nowadays, overseas companies, or the billionaires behind them, can sue governments for the laws they pass, at private courts made up of corporate lawyers. The cases take place in secret. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including businesses operating from this country. They are open exclusively to entities based overseas.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but funds the panel members decide the company would perhaps have made. The administration could be forced to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as companies learn from each other, and hedge funds finance suits for a share of a cut of the settlements. The consequence? National sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the rulings taken by elected bodies is that this clause has been inserted – absent public approval, and frequently under conditions of total confidentiality – within international trade agreements.

A Concrete Instance: The UK Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The judge determined that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had granted. Currently, this legal outcome could be compromised by an offshore tribunal reporting to only the companies filing the suit.

During August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it appears probable that he may employ the arbitration process to fight the sanctions the UK levied against him following the Russian aggression. He has started suing Luxembourg on these grounds, seeking $16bn: equivalent to half of state's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these scenarios were not possible. In 2014, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this issue accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies grasp the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has now materialised. This year, energy and mining firms have filed a record number of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP