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Can you perceive our system of government functions? Maybe similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that was how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at private courts made up of business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, including businesses operating from this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the arbitrators determine the company would perhaps have made. The government may have to rescind the measure. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of legal actions are being initiated, as corporations take cues from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the rulings taken by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of total confidentiality – inside international trade agreements.

A Real-World Example: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The judge found that proposals to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had issued. Currently, this victory is under threat by an foreign court reporting to only the entities bringing the case.

Last August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no idea how much this sum represents. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has filed a claim against Luxembourg with similar intent, seeking $16bn: equivalent to half of nation's yearly budget. Part of the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations grasp the power they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That threat is now a reality. This year, energy and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to halt global warming. Companies have so far won vast sums via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP