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Can you perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue nation states for the policies they pass, at private courts made up of commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these panels allow no right of appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open solely for businesses operating from foreign soil.

When a secret court rules that a government measure could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but money the tribunal officials decide the company would perhaps have made. The state may have to abandon its policy. It becomes hesitant to passing future laws of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies learn from each other, and investment funds fund legal actions for a share of a cut of the awards. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the rulings enacted by parliaments is that this provision has been written – absent public approval, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for three decades, in northwest England, 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 incoming administration subsequently revoked the licence the previous administration had issued. Today, this success faces being overturned by an offshore tribunal accountable to only the entities petitioning it.

Last August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no clear indication how much this might be. What legal team is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a foreign company contests it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the court on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he will utilise the tribunal to contest the sanctions the UK levied against him after the invasion of Ukraine. He has previously filed a claim against another European state with similar intent, seeking $16bn: half that government’s yearly budget. Part of the legal team representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Risks

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this topic described activists of “alarmism … the fact is, ISDS does not affect 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 influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That threat has come to pass. In the current period, energy and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have obtained the majority. That represents the combined GDP