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Can you perceive our democratic process works? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

In the modern era, international firms, along with the billionaires who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these bodies provide no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even businesses based in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but compensation the panel members determine the company could potentially have made. The administration might be compelled to rescind the measure. It becomes hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The outcome? National sovereignty and democratic governance are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions taken by parliaments is that this clause has been incorporated – without public consent, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the high 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, had been illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government later cancelled the consent the former government had approved. Now, this success faces being overturned by an secret arbitration panel reporting to no one but the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this could amount to. Who is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a foreign company contests it through an secretive private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK imposed on him after the Russian aggression. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Included in the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that such things wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That warning has now materialised. This year, energy and resource corporations have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to stop global warming. Companies have to date won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP