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How do you understand our democratic process operates? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Today, overseas companies, or the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. The cases take place in secret. Unlike our courts, these panels allow no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. The door is open only to businesses based overseas.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation are based not on real financial harm but funds the arbitrators determine the company would perhaps have made. The administration could be forced to abandon its policy. It is discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The result? Sovereignty and democracy are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices enacted by legislatures is that this clause has been incorporated – without democratic mandate, and often in a climate of total confidentiality – within trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the consent the previous administration had issued. Currently, this victory is under threat by an foreign court answering to only the companies petitioning it.

Last August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. Who is acting on its behalf against the state? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation contests it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he may employ the tribunal to contest the restrictions the UK enacted against him following the war in Ukraine. He has started suing another European state with similar intent, seeking sixteen billion dollars: half that government’s yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that such things were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this topic labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms grasp the influence bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. This year, energy and mining firms have lodged a record number of claims against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP