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Can you understand our system of government operates? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, or the oligarchs who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for businesses based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The administration could be forced to abandon its policy. It will be hesitant to enacting future policies in that area, for fear of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as firms learn from each other, and private equity fund legal actions for a share of a share of the settlements. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – within trade treaties.

A Concrete Example: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge found that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had approved. Now, this victory faces being overturned by an foreign court reporting to no one but the corporations bringing the case.

During August, a firm whose ultimate owners reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The company is suing the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it appears probable that he may employ the tribunal to fight the sanctions the UK imposed on him following the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, seeking $16bn: equivalent to half of nation's yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that such things were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An expert on this topic described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies grasp the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That warning is now a reality. This year, energy and extraction companies have initiated a historic level of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP