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Can you reckon our system of government functions? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

Today, foreign corporations, along with the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings take place in secret. Unlike our courts, these bodies allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. They are open exclusively to businesses registered abroad.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but funds the arbitrators determine the company might otherwise have made. The government may have to abandon its policy. It is deterred from enacting future policies in that area, for fear of being sued.

A Process Running Rampant

Record numbers of disputes are being initiated, as firms take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings enacted by parliaments is that this provision has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – into international trade agreements.

A Real-World Example: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government later cancelled the consent the Tories had granted. Now, this victory faces being overturned by an offshore tribunal accountable to exclusively the companies filing the suit.

During August, a corporate entity whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up 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. Citizens have little idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case at present, but it appears probable that he may employ the arbitration process to contest the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against another European state on these grounds, seeking a colossal sum: equivalent to half of nation's yearly income. Included in the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” An expert on this matter labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That threat has now materialised. In the current period, oil and gas and extraction companies have lodged a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP