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How do you perceive our democratic process works? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, along with the billionaires behind them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to corporations registered abroad.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

These sums are based not on actual losses but money the tribunal officials conclude the company might otherwise have made. The administration might be compelled to rescind the measure. It will be deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being filed, as corporations observe each other, and private equity fund legal actions for a share of a cut of the takings. The result? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings enacted by legislatures is that this stipulation has been inserted – absent public approval, and often in conditions of total confidentiality – inside trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The judge ruled that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the consent the Tories had granted. Now, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the corporations filing the suit.

In August, a firm whose final controllers are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the United States was convened to hear it.

This firm is suing the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he’ll use the tribunal to contest the sanctions the UK levied against him after the war in Ukraine. He has previously started suing a small nation on these grounds, demanding a colossal sum: an amount representing half state's annual revenue. Part of the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Risks

We were assured that such things could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An expert on this topic labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations start to realise the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning is now a reality. In the current period, fossil fuel and mining firms have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have so far won $114bn through ISDS, of which oil majors have secured the majority. That equates to the combined GDP