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Can you reckon our system of government works? Maybe 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. End of story. Well, that’s how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

Today, international firms, and the billionaires that control them, are able to litigate against nation states for the laws they pass, at private courts staffed by commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including enterprises based in this country. The door is open exclusively to entities based overseas.

If a tribunal rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums constitute not tangible damages but funds the arbitrators conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as firms observe each other, and hedge funds fund legal actions in return for a cut of the takings. The result? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the choices taken by elected bodies is that this stipulation has been written – absent public approval, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Example: The UK Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The presiding officer determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The new government subsequently revoked the consent the previous administration had issued. Today, this legal outcome faces being overturned by an offshore tribunal accountable to only the entities filing the suit.

During August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. Which individual is serving as its counsel challenging the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming $16bn: equivalent to half of state's yearly income. Among the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Threats

The public was told that these events could not occur. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this issue labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies grasp the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to stop global warming. Corporations have so far won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP