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How do you understand our system of government functions? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. That's it. However, that’s how it once functioned. No longer.

The Rise of Shadow Tribunals

Today, overseas companies, and the billionaires that control them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of business advocates. The cases are held behind closed doors. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including enterprises operating from this country. They are open exclusively to entities registered abroad.

When a secret court finds that a government measure may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The government may have to abandon its policy. It is discouraged from introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as firms learn from each other, and investment funds finance suits in return for a portion of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions taken by parliaments is that this provision has been incorporated – without public consent, and often in conditions of extreme secrecy – into international trade agreements.

A Concrete Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The new government subsequently revoked the licence the previous administration had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to only the entities filing the suit.

During August, a company whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Which individual is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it appears probable that he may employ the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has initiated proceedings against another European state for this reason, claiming $16bn: equivalent to half of nation's yearly budget. Included in the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” A consultant on this matter described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “when companies start to realise the authority they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a historic level of suits against nations rich and poor, opposing – like the example of the UK mine – official measures to halt climate breakdown. Companies have so far won vast sums via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP