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Can you perceive our political system works? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, along with the wealthy individuals that control them, have the power to sue governments for the policies they pass, at private courts staffed by business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses headquartered in this country. Access is granted solely for corporations based overseas.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but money the panel members determine the company would perhaps have made. The government could be forced to drop the legislation. It becomes hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being brought, as firms take cues from each other, and private equity finance suits in return for a portion of the settlements. The outcome? Democratic sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions taken by elected bodies is that this clause has been inserted – without public consent, and often in an atmosphere of total confidentiality – within trade treaties.

A Real-World Example: The UK Coalmine

Last year, a conservation group won a great victory at the senior court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the permission the former government had granted. Now, this legal outcome could be compromised by an foreign court reporting to exclusively the entities bringing the case.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. Last week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the money it might have made if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Who is representing it in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case so far, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him following the Russian aggression. He has previously started suing a small nation for this reason, claiming $16bn: equivalent to half of government’s annual revenue. Among the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Costs

The public was told that these events could not occur. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this issue described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies grasp the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That threat has now materialised. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Companies have so far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP