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What is your understand our system of government operates? Maybe similar to this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, or the oligarchs that control them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals staffed by business advocates. The cases are conducted in secret. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, including businesses based in this country. The door is open only to businesses based overseas.

If a tribunal finds that a government measure might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These awards constitute not real financial harm but compensation the panel members determine the company would perhaps have made. The government could be forced to drop the legislation. It will be discouraged from enacting future policies in that area, for fear of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being initiated, as firms observe each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The justice ruled that proposals to open the first major coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Today, this legal outcome is under threat by an foreign court accountable to only the companies filing the suit.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

The claimant is suing the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it in opposition to the state? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: half that state's annual revenue. Among the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as guarantee 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 remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these events were not possible. In 2014, a government leader, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies start to realise the influence they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. This year, fossil fuel and extraction companies have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the UK mine – official measures to halt climate breakdown. Companies have thus far won $114bn by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP