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How do you perceive our system of government functions? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. End of story. Well, that used to be how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Today, international firms, or the oligarchs behind them, have the power to sue governments for the regulations they pass, at private courts made up of corporate lawyers. The cases take place in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for corporations based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but funds the arbitrators decide the company could potentially have made. The state may have to rescind the measure. It becomes hesitant to passing future laws in that area, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as firms observe each other, and investment funds finance suits in return for a portion of the takings. The outcome? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the decisions made by legislatures is that this provision has been incorporated – absent public approval, and frequently under a climate of profound opacity – inside trade treaties.

A Specific Instance: The UK Coalmine

Last year, activists won a great victory at the senior court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government then withdrew the consent the Tories had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to exclusively the companies bringing the case.

Last August, a corporate entity whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the money it would have generated if the mine had received permission to commence operations. We have no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him following the war in Ukraine. He has already initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that these scenarios could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An expert on this issue described critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. This year, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have so far won $114bn via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP