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Can you understand our system of government works? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that was how it once functioned. No longer.

The Rise of Secret Arbitration Panels

Today, international firms, along with the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, including companies operating from this country. Access is granted solely for businesses registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation represent not tangible damages but money the arbitrators conclude the company would perhaps have made. The government might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation in that area, worried about facing litigation.

A System Running Rampant

Record numbers of cases are being initiated, as companies learn from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The result? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices enacted by elected bodies is that this provision has been written – absent public approval, and frequently under conditions of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had granted. Now, this victory could be compromised by an foreign court accountable to only the corporations bringing the case.

In August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in the US capital was established to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. The public has no idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK imposed on him following the Russian aggression. He has initiated proceedings against another European state with similar intent, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the lawyers on his side? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. Recently, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to stop global warming. Companies have so far won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP