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How do you understand our political system functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that’s how it used to work. No longer.

The Rise of Secret Arbitration Panels

Nowadays, international firms, along with the wealthy individuals behind them, can sue governments for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, including enterprises based in this country. The door is open only to businesses based overseas.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but compensation the tribunal officials decide the company could potentially have made. The administration may have to rescind the measure. It becomes hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and private equity bankroll lawsuits in exchange for a cut of the settlements. The result? Sovereignty and popular rule are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings made by elected bodies is that this clause has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, activists won a great victory at the high court. The presiding officer determined that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the consent the Tories had approved. Now, this success could be compromised by an foreign court accountable to no one but the companies filing the suit.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. Who is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against a small nation with similar intent, demanding a colossal sum: an amount representing half state's yearly income. Among the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this issue described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat has now materialised. Recently, energy and mining firms have initiated a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP