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What is your understand our political system works? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises operating from this country. Access is granted only to corporations based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These sums are based not on actual losses but money the tribunal officials decide the company would perhaps have made. The government might be compelled to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as corporations observe each other, and investment funds fund legal actions in exchange for a portion of the takings. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices taken by legislatures is that this provision has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the licence the former government had issued. Today, this success is under threat by an offshore tribunal answering to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. What legal team is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the high court validates it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state for this reason, claiming $16bn: equivalent to half of nation's yearly income. Included in the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, stated: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this issue described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about such legal actions. Warnings that “as corporations grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That threat is now a reality. In the current period, oil and gas and mining firms have lodged a historic level of cases against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to stop global warming. Firms have so far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP