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Can you perceive our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Advent of Secret Tribunals

Nowadays, international firms, and the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these panels grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies operating from this country. Access is granted only to businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but money the tribunal officials decide the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from passing future laws along the same lines, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being filed, as companies take cues from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? National sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings made by legislatures is that this clause has been written – absent public approval, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Real-World Example: The UK Coalmine

A year ago, activists won a great victory at the high court. The judge determined that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration then withdrew the consent the former government had approved. Today, this victory faces being overturned by an secret arbitration panel reporting to no one but the entities bringing the case.

Last August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to commence operations. The public has no idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen state funds as collateral for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that these scenarios could not occur. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this issue labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have initiated a historic level of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have to date won $114bn through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP