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How do you perceive our democratic process operates? It could be similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, international firms, and the wealthy individuals who own them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation represent not tangible damages but money the panel members decide the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The consequence? Sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices taken by parliaments is that this stipulation has been incorporated – without public consent, and often in a climate of profound opacity – into trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The judge found that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities bringing the case.

Last August, a firm whose ultimate owners are located in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have little idea how much this might be. Which individual is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state passes a law, the national judiciary supports it, then a foreign company challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the legal team on his side? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Threats

We were assured that these events were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about such legal actions. Predictions that “when companies grasp the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That threat is now a reality. This year, oil and gas and mining firms have initiated a record number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Corporations have thus far won $114bn via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP