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Can you understand our political system operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Advent of Secret Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, or even companies operating from this country. They are open solely for businesses based overseas.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

This compensation constitute not actual losses but money the tribunal officials decide the company could potentially have made. The government may have to drop the legislation. It becomes hesitant to passing future laws in that area, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the awards. The outcome? National sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices enacted by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the senior court. The judge found that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The new government then withdrew the permission the Tories had approved. Currently, this legal outcome is under threat by an foreign court answering to exclusively the corporations petitioning it.

In August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company disputes it through an unaccountable private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has started suing another European state with similar intent, claiming a colossal sum: half that government’s yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s procrastination in using frozen oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Costs

The public was told that these events could not occur. Previously, a senior politician, championing the most significant and hazardous of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has never been a problem in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat has come to pass. This year, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have to date won vast sums through ISDS, of which energy giants have obtained $84bn. That represents the combined GDP