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What is your reckon our system of government functions? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. Yet, that’s how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

Today, foreign corporations, and the billionaires that control them, can sue governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to businesses based overseas.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it can award damages of vast sums, running into billions.

This compensation constitute not actual losses but money the arbitrators determine the company might otherwise have made. The administration may have to drop the legislation. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as firms learn from each other, and private equity fund legal actions for a share of a cut of the settlements. The consequence? Democratic sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices made by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the high court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government then withdrew the licence the Tories had approved. Now, this victory could be compromised by an offshore tribunal answering to only the companies bringing the case.

In August, a firm whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the United States was set up to hear it.

The company is suing the UK for the revenue it might have made if the mine had received permission to go ahead. We have little idea how much this could amount to. Who is serving as its counsel in opposition to the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him following the invasion of Ukraine. He has initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Among the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that these events could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were dismissed with widespread derision.

That threat is now a reality. Recently, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Companies have to date won $114bn via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP