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How do you perceive our system of government works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases take place behind closed doors. Unlike our courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises based in this country. The door is open exclusively to entities registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, even billions.

These sums constitute not actual losses but funds the arbitrators decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to introducing similar legislation in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? National sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions taken by legislatures is that this stipulation has been inserted – without public consent, and frequently under conditions of total confidentiality – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government later cancelled the permission the Tories had granted. Today, this victory could be compromised by an offshore tribunal accountable to only the entities filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven lodged a claim against the UK government. Recently a tribunal in Washington DC was established to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. We have no clear indication how much this sum represents. What legal team is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state makes a decision, the high court supports it, then a international entity contests it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he may employ the tribunal to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg on these grounds, seeking $16bn: half that nation's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this issue accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations grasp the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That prediction is now a reality. Recently, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to stop environmental catastrophe. Corporations have to date won vast sums through ISDS, of which energy giants have secured $84bn. That represents the combined GDP