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How do you understand our system of government works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. However, that’s how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, and the billionaires who own them, can sue governments for the regulations they pass, at private courts composed of commercial attorneys. The cases take place away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to corporations based overseas.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it can award damages of vast sums, running into billions.

This compensation represent not real financial harm but funds the panel members conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies along the same lines, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in return for a share of the takings. The consequence? National sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings made by parliaments is that this provision has been inserted – without public consent, and often in an atmosphere of profound opacity – inside trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the licence the Tories had granted. Now, this legal outcome could be compromised by an foreign court accountable to exclusively the entities bringing the case.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. We have no idea how much this sum represents. Who is serving as its counsel against the state? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a foreign company challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him after the Russian aggression. He has already filed a claim against a small nation with similar intent, demanding a colossal sum: an amount representing half government’s yearly income. Among the legal team representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these events could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, oil and gas and mining firms have filed a record number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to stop global warming. Companies have thus far won vast sums via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP