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Can you reckon our democratic process works? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals behind them, can sue nation states for the laws they pass, at private courts composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, including businesses based in this country. Access is granted only to businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but funds the arbitrators decide the company could potentially have made. The government may have to drop the legislation. It becomes discouraged from passing future laws along the same lines, for fear of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being initiated, as corporations learn from each other, and private equity fund legal actions in return for a cut of the awards. The result? National sovereignty and popular rule are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices taken by legislatures is that this clause has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Instance: The UK Coal Mine

Last year, a conservation group won a great victory at the senior court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The new government subsequently revoked the consent the Tories had approved. Currently, this legal outcome could be compromised by an foreign court answering to exclusively the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven initiated proceedings against the UK government. Last week a tribunal in Washington DC was set up to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to proceed. We have no idea how much this might be. Which individual is acting on its behalf against the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has started suing another European state for this reason, claiming sixteen billion dollars: half that state's yearly budget. Part of the lawyers on his side? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as security 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 extraordinary, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that these scenarios could not occur. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this issue described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about such legal actions. Warnings that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, energy and resource corporations have lodged a historic level of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have so far won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP