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What is your understand our political system functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. No longer.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, and the billionaires behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted only to entities operating from foreign soil.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These awards are based not on tangible damages but compensation the arbitrators conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Record numbers of legal actions are being initiated, as companies learn from each other, and hedge funds finance suits for a share of a portion of the settlements. The consequence? National sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of profound opacity – into international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice found that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the consent the former government had granted. Today, this victory is under threat by an secret arbitration panel answering to no one but the corporations bringing the case.

Last August, a company whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Who is acting on its behalf challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a international entity disputes it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK levied against him following the Russian aggression. He has previously filed a claim against another European state for this reason, demanding $16bn: half that state's yearly income. Among the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these events could not occur. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That warning has come to pass. This year, oil and gas and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP