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How do you understand our system of government works? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. End of story. However, that used to be how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts staffed by commercial attorneys. The cases take place in secret. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. The door is open exclusively to entities based overseas.

When a secret court finds that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

This compensation constitute not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The government might be compelled to rescind the measure. It is discouraged from enacting future policies in that area, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds fund legal actions in return for a share of the takings. The result? Democratic sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions taken by elected bodies is that this clause has been written – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge ruled that schemes to open the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the permission the Tories had granted. Now, this victory faces being overturned by an foreign court answering to exclusively the entities petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had received permission to proceed. Citizens have no idea how much this might be. Who is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court supports it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK imposed on him after the invasion of Ukraine. He has filed a claim against another European state with similar intent, claiming $16bn: equivalent to half of state's annual revenue. Among the counsel on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An expert on this topic described critics of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies grasp the power they now possess, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to prevent global warming. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP