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Can you understand our system of government operates? It could be something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. However, that was how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, and the billionaires that control them, can sue elected administrations for the regulations they pass, at private courts staffed by business advocates. The cases are held behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises operating from this country. Access is granted only to corporations based overseas.

When a secret court finds that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

This compensation represent not tangible damages but funds the arbitrators decide the company might otherwise have made. The state may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? National sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices taken by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under a climate of profound opacity – within trade treaties.

A Concrete Example: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Now, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the entities bringing the case.

Last August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the US capital was established to consider the case.

The company is litigating against the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. What legal team is representing it in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity disputes it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the arbitration process to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has previously started suing a small nation with similar intent, claiming $16bn: an amount representing half nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Empty Promises and Growing Threats

Politicians promised that these events were not possible. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this matter described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “once firms begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have so far won $114bn by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP