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How do you understand our system of government works? It could be something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. However, that’s how it used to work. No longer.

The Emergence of Secret Arbitration Panels

In the modern era, overseas companies, along with the billionaires that control them, have the power to sue nation states for the policies they pass, at private courts made up of business advocates. The cases take place behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. Access is granted solely for corporations based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, running into billions.

These awards are based not on actual losses but compensation the panel members conclude the company could potentially have made. The government could be forced to drop the legislation. It will be hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Historically high figures of disputes are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The outcome? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings made by elected bodies is that this provision has been inserted – without public consent, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Last year, activists secured a significant win at the High Court. The justice found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government later cancelled the consent the Tories had granted. Today, this legal outcome could be compromised by an offshore tribunal answering to no one but the corporations petitioning it.

Last August, a firm whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the United States was convened to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. We have little idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has filed a claim against another European state with similar intent, demanding a colossal sum: equivalent to half of nation's yearly budget. Part of the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts contend that the EU’s delay in utilising seized state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that these scenarios were not possible. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this topic accused activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies start to realise the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. Recently, oil and gas and mining firms have filed a historic level of suits against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have thus far won $114bn via ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP