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How do you perceive our system of government functions? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, or the billionaires who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. Access is granted solely for corporations based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the tribunal officials determine the company could potentially have made. The administration might be compelled to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being initiated, as corporations take cues from each other, and investment funds finance suits in exchange for a cut of the settlements. The outcome? Sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings enacted by legislatures is that this clause has been written – without public consent, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that schemes to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration later cancelled the licence the Tories had approved. Now, this success faces being overturned by an foreign court accountable to only the corporations bringing the case.

Last August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Last week a dispute settlement body in the United States was established to hear it.

This firm is suing the UK for the profits it would have generated if the mine had received permission to proceed. Citizens have little idea how much this sum represents. What legal team is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot the MP. The administration enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him after the Russian aggression. He has previously started suing Luxembourg with similar intent, seeking sixteen billion dollars: an amount representing half state's annual revenue. Included in the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this matter labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies start to realise the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. This year, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations rich and poor, challenging – like the example of the UK mine – government attempts to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP