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Can you reckon our system of government operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, along with the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open only to entities registered abroad.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but money the arbitrators determine the company would perhaps have made. The administration may have to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as firms learn from each other, and investment funds finance suits in exchange for a share of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within trade treaties.

A Real-World Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the licence the former government had issued. Today, this legal outcome is under threat by an foreign court answering to only the companies bringing the case.

During August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in the United States was set up to hear it.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him following the Russian aggression. He has already started suing a small nation with similar intent, seeking a colossal sum: half that government’s yearly budget. Included in the legal team representing him there? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that these events were not possible. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a historic level of cases against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP