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Can you reckon our political system operates? Maybe similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, international firms, along with the wealthy individuals that control them, are able to litigate against nation states for the regulations they pass, at private courts made up of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these panels grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, including companies headquartered in this country. They are open only to businesses based overseas.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but funds the tribunal officials decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as companies learn from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the rulings enacted by parliaments is that this provision has been inserted – without public consent, and typically amid conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer found that proposals to open the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The new government later cancelled the permission the former government had issued. Today, this victory could be compromised by an secret arbitration panel answering to only the corporations filing the suit.

In August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was convened to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has no idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him following the invasion of Ukraine. He has previously started suing another European state with similar intent, demanding $16bn: equivalent to half of government’s yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that such things could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this issue labelled critics of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “when companies grasp the power bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That threat has come to pass. In the current period, fossil fuel and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Companies have thus far won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP