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Can you understand our democratic process functions? Maybe similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. However, that’s how it operated in the past. No longer.

The Emergence of Secret Arbitration Panels

In the modern era, overseas companies, or the billionaires behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. They are open solely for corporations operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but money the panel members conclude the company could potentially have made. The administration may have to rescind the measure. It will be deterred from passing future laws along the same lines, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations observe each other, and private equity finance suits in exchange for a share of the awards. The result? Democratic sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices made by parliaments is that this clause has been incorporated – without public consent, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the permission the former government had approved. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the entities petitioning it.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a tribunal in the United States was convened to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court upholds it, then a international entity contests it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK levied against him following the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: half that state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these events could not occur. Years ago, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “once firms start to realise the influence they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That warning has now materialised. In the current period, fossil fuel and resource corporations have initiated a record number of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Firms have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP