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What is your understand our system of government operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

Today, international firms, or the wealthy individuals who own them, can sue governments for the laws they pass, at private courts composed of corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these panels provide no right of appeal or legal review. You or I are unable to file a case to them, just as our government, including businesses based in this country. Access is granted only to entities registered abroad.

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

These sums represent not actual losses but money the panel members decide the company could potentially have made. The state may have to abandon its policy. It is discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies observe each other, and investment funds finance suits in return for a cut of the takings. The result? Sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions taken by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the high court. The justice ruled that schemes to dig the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The Labour government later cancelled the consent the previous administration had issued. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to only the entities filing the suit.

During August, a firm whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been permitted to commence operations. The public has little idea how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case at present, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK levied against him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, demanding a colossal sum: an amount representing half state's yearly budget. Among the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these events could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning has come to pass. Recently, fossil fuel and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop global warming. Firms have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP