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What is your understand our system of government works? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is upheld by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, or the wealthy individuals who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies based in this country. They are open solely for businesses based overseas.

When a secret court finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums are based not on real financial harm but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes deterred from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations observe each other, and private equity bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings taken by parliaments is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Instance: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The judge ruled that schemes to open the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The new government later cancelled the consent the previous administration had issued. Today, this legal outcome could be compromised by an foreign court answering to no one but the entities bringing the case.

Last August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is suing the UK for the money it might have made if the mine had been permitted to proceed. We have no clear indication how much this sum represents. Who is representing it challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK enacted against him following the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the lawyers representing him there? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things could not occur. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue labelled activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. Recently, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, challenging – like the example of the UK mine – government attempts to stop global warming. Firms have so far won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP