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Can you understand our system of government works? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, and the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open solely for businesses registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, potentially billions.

These sums represent not actual losses but funds the panel members conclude the company could potentially have made. The government could be forced to drop the legislation. It becomes deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being initiated, as firms take cues from each other, and hedge funds fund legal actions in return for a portion of the awards. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices made by legislatures is that this clause has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on climate commitments. The Labour government later cancelled the permission the former government had granted. Now, this success could be compromised by an secret arbitration panel answering to only the entities filing the suit.

Last August, a firm whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is serving as its counsel against the state? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The state enacts a policy, the national judiciary validates it, then a international entity contests it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against another European state for this reason, demanding $16bn: half that nation's yearly income. Part of the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that these events could not occur. Previously, a government leader, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An adviser on this issue labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That prediction has now materialised. This year, energy and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have thus far won vast sums through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP