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How do you understand our political system works? Maybe something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals who own them, are able to litigate against nation states for the regulations they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. The door is open solely for corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but compensation the arbitrators conclude the company would perhaps have made. The government may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as companies observe each other, and private equity fund legal actions in exchange for a cut of the awards. The consequence? Democratic sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice determined that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the consent the previous administration had issued. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the entities bringing the case.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The company is suing the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. Who is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a foreign company contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the Russian aggression. He has previously started suing another European state on these grounds, demanding a colossal sum: half that government’s yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that such things were not possible. Previously, a government leader, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this topic described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by general mockery.

That threat is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of suits against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt environmental catastrophe. Firms have so far won vast sums by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP