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Can you perceive our political system operates? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, along with the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. Access is granted only to businesses operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

This compensation represent not actual losses but money the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies observe each other, and private equity bankroll lawsuits for a share of a share of the takings. The result? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – into international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the consent the former government had granted. Currently, this success could be compromised by an foreign court answering to exclusively the companies bringing the case.

During August, a company whose final controllers are based in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The government passes a law, the high court validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has started suing another European state with similar intent, claiming $16bn: an amount representing half nation's yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these events could not occur. Previously, a government leader, championing the largest and riskiest of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this matter described critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “when companies begin to understand the power they now possess, they will shift their focus from the weak nations to the developed economies” were met with scepticism.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a historic level of suits against nations rich and poor, opposing – like the example of the Whitehaven project – government attempts to halt global warming. Companies have so far won vast sums by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP