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What is your reckon our political system functions? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. However, that was how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, overseas companies, or the billionaires that control them, can sue elected administrations for the laws they pass, at private courts composed of corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but compensation the tribunal officials determine the company would perhaps have made. The state might be compelled to rescind the measure. It will be discouraged from passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Record numbers of cases are being filed, as firms take cues from each other, and private equity fund legal actions in return for a portion of the awards. The result? Sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had issued. Currently, this success is under threat by an secret arbitration panel answering to no one but the companies petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute 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. The public knows nothing of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK enacted against him after the Russian aggression. He has previously filed a claim against another European state for this reason, claiming $16bn: an amount representing half nation's annual revenue. Included in the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this topic described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has come to pass. In the current period, energy and extraction companies have filed a record number of suits against nations rich and poor, contesting – similar to the UK mine – government attempts to halt global warming. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP