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Can you understand our political system works? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that was how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, overseas companies, along with the oligarchs who own them, are able to litigate against nation states for the regulations they pass, at private courts composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. They are open only to corporations based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but compensation the panel members decide the company could potentially have made. The government might be compelled to abandon its policy. It will be discouraged from enacting future policies along the same lines, worried about being sued.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and private equity fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions made by parliaments is that this clause has been written – without democratic mandate, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Example: The Whitehaven Coalmine

A year ago, activists secured a significant win at the High Court. The presiding officer found that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The new government later cancelled the licence the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal answering to only the companies bringing the case.

Last August, a company whose beneficial owners are based in the tax haven lodged a claim challenging the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. We have little idea how much this might be. Who is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a foreign company challenges it through an secretive arbitration panel, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him following the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of government’s yearly budget. Among the counsel on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they now possess, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That threat is now a reality. This year, fossil fuel and extraction companies have filed a historic level of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which energy giants have obtained $84bn. That represents the combined GDP