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Can you understand our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, along with the wealthy individuals who own them, can sue elected administrations for the policies they pass, at private courts staffed by commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for entities registered abroad.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to drop the legislation. It will be hesitant to enacting future policies in that area, worried about being sued.

A System Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and private equity fund legal actions in return for a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the choices made by elected bodies is that this clause has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice ruled that plans to open the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government later cancelled the licence the Tories had granted. Today, this victory is under threat by an secret arbitration panel accountable to only the companies bringing the case.

Last August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a tribunal in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to proceed. We have no clear indication how much this could amount to. Who is representing it challenging the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation for this reason, demanding a colossal sum: equivalent to half of state's yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. In 2014, a senior politician, championing the biggest and most dangerous 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 expert on this issue described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the developed economies” were dismissed with widespread derision.

That threat has now materialised. Recently, energy and resource corporations have filed a record number of claims against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to prevent environmental catastrophe. Corporations have to date won $114bn through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP