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What is your perceive our system of government functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, international firms, along with the billionaires behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These awards represent not tangible damages but money the tribunal officials conclude the company would perhaps have made. The state may have to abandon its policy. It is hesitant to enacting future policies along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the awards. The result? Democratic sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge found that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government then withdrew the consent the previous administration had approved. Now, this legal outcome could be compromised by an foreign court reporting to only the companies bringing the case.

In August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. We have no idea how much this sum represents. Who is representing it in opposition to the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The government passes a law, the national judiciary validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, seeking $16bn: half that government’s yearly income. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by general mockery.

That prediction has now materialised. This year, oil and gas and extraction companies have lodged a record number of cases against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP