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What is your perceive our democratic process functions? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals that control them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. They are open solely for entities operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, even billions.

These sums represent not tangible damages but compensation the tribunal officials determine the company might otherwise have made. The administration could be forced to abandon its policy. It is discouraged from passing future laws in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as corporations observe each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The outcome? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions taken by legislatures is that this provision has been written – without democratic mandate, and often in conditions of total confidentiality – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Last year, activists secured a significant win at the senior court. The justice determined that schemes to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the previous administration had issued. Now, this success could be compromised by an secret arbitration panel answering to no one but the corporations filing the suit.

Last August, a corporate entity whose final controllers reside in the tax haven initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Which individual is acting on its behalf challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court supports it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the arbitration process to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing a small nation with similar intent, seeking $16bn: half that state's annual revenue. Part of the lawyers on his side? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s procrastination in using frozen oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events were not possible. Previously, a senior politician, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this topic labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations start to realise the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. Recently, oil and gas and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to halt climate breakdown. Companies have to date won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP