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Can you perceive our system of government works? Maybe something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that was how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, overseas companies, and the wealthy individuals that control them, have the power to sue nation states for the policies they pass, at private courts composed of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, including enterprises based in this country. They are open only to entities based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on real financial harm but compensation the panel members decide the company would perhaps have made. The administration might be compelled to drop the legislation. It will be discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of legal actions are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Democratic sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices taken by legislatures is that this provision has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The justice 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 endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The new government subsequently revoked the consent the Tories had granted. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the corporations bringing the case.

In August, a company whose beneficial owners reside in the tax haven lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has started suing Luxembourg with similar intent, claiming sixteen billion dollars: half that state's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Costs

We were assured that these scenarios were not possible. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this topic accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat has come to pass. Recently, fossil fuel and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, contesting – like the example of the UK mine – official measures to prevent global warming. Companies have so far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP