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How do you perceive our political system works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, along with the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open only to businesses based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but funds the arbitrators conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is deterred from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and private equity finance suits for a share of a share of the awards. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the decisions made by elected bodies is that this provision has been written – absent public approval, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Case: The UK Coalmine

Last year, a conservation group won a great victory at the high court. The justice found that schemes to dig the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Now, this victory is under threat by an secret arbitration panel answering to no one but the companies bringing the case.

In August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. The public has no idea how much this sum represents. Which individual is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the restrictions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

We were assured that such things could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter described critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That warning is now a reality. Recently, energy and extraction companies have initiated a record number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Firms have so far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP