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Can you reckon our system of government works? Maybe similar to this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. The cases take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. The door is open only to entities operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

These awards represent not tangible damages but money the arbitrators decide the company could potentially have made. The government may have to drop the legislation. It will be hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as corporations take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid conditions of total confidentiality – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Today, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a dispute settlement body in the United States was established to consider the case.

The company is suing the UK for the profits it could have earned if the mine had received permission to proceed. The public has no idea how much this sum represents. What legal team is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows little of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts believe that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic accused critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat is now a reality. In the current period, oil and gas and extraction companies have lodged a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have to date won $114bn via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP