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Can you perceive our political system works? It could be along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, and the wealthy individuals who own them, can sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are held in secret. Unlike our courts, these tribunals grant no right of appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. Access is granted only to businesses registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but money the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It becomes hesitant to passing future laws in that area, for fear of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices enacted by elected bodies is that this stipulation has been inserted – without public consent, and typically amid conditions of profound opacity – into international trade agreements.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the permission the former government had approved. Today, this victory could be compromised by an offshore tribunal accountable to only the companies filing the suit.

During August, a firm whose beneficial owners are located in the tax haven lodged a claim against the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. We have little idea how much this might be. Who is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it seems likely that he may employ the tribunal to fight the sanctions the UK levied against him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Costs

Politicians promised that these events were not possible. Previously, a senior politician, championing the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter described campaigners of “exaggeration … the fact is, 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 begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. Recently, oil and gas and mining firms have filed a historic level of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to halt global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP