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What is your reckon our system of government operates? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue nation states for the regulations they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open only to corporations operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company could potentially have made. The state might be compelled to drop the legislation. It is deterred from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and private equity finance suits in return for a portion of the settlements. The result? National sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices taken by parliaments is that this stipulation has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Example: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The judge found that schemes to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the permission the former government had granted. Today, this victory is under threat by an secret arbitration panel accountable to exclusively the entities filing the suit.

Last August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Last week a tribunal in the US capital was convened to hear it.

This firm is suing the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company contests it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against another European state with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that such things were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. Recently, energy and mining firms have initiated a record number of suits against nations rich and poor, contesting – similar to the UK mine – government attempts to halt global warming. Companies have so far won $114bn through ISDS, of which oil majors have obtained the majority. That represents the combined GDP