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How do you reckon our system of government operates? It could be something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that was how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Today, foreign corporations, or the oligarchs who own them, have the power to sue governments for the laws they pass, at private courts staffed by business advocates. The cases take place in secret. Unlike our courts, these bodies grant no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to entities based overseas.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but compensation the tribunal officials determine the company might otherwise have made. The state may have to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a portion of the settlements. The result? National sovereignty and democratic governance are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings taken by parliaments is that this clause has been written – without democratic mandate, and often in conditions of profound opacity – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, activists won a great victory at the high court. The judge ruled that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the consent the previous administration had granted. Currently, this victory faces being overturned by an offshore tribunal answering to no one but the companies bringing the case.

In August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim against the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is serving as its counsel against the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The government makes a decision, the high court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the arbitration process to fight the sanctions the UK enacted against him subsequent to the Russian aggression. He has filed a claim against another European state for this reason, demanding sixteen billion dollars: half that government’s annual revenue. Part of the legal team representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that such things could not occur. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this topic accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies grasp the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That prediction has come to pass. Recently, energy and resource corporations have initiated a historic level of cases against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP