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How do you understand our democratic process operates? It could be similar to this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

Today, international firms, along with the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held in secret. Unlike our courts, these panels provide no avenue for appeal or legal review. You or I cannot take a case to them, nor can our government, or even enterprises operating from this country. They are open solely for businesses based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not actual losses but money the panel members determine the company could potentially have made. The government could be forced to abandon its policy. It will be discouraged from passing future laws along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and hedge funds fund legal actions in return for a share of the settlements. The result? National sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings made by legislatures is that this clause has been incorporated – without public consent, and often in a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer found that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the consent the former government had approved. Currently, this victory faces being overturned by an secret arbitration panel reporting to no one but the companies petitioning it.

Last August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against another European state with similar intent, claiming a colossal sum: half that government’s yearly income. Part of the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these scenarios could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this matter described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms start to realise the authority they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That threat has now materialised. This year, energy and resource corporations have initiated a historic level of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have so far won $114bn via ISDS, of which oil majors have secured the majority. That represents the combined GDP