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What is your understand our democratic process works? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. End of story. Well, that used to be how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted in secret. In contrast to domestic courts, these panels grant no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even companies based in this country. Access is granted only to entities based overseas.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

This compensation represent not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It is deterred from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and private equity finance suits for a share of a share of the takings. The outcome? National sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings enacted by elected bodies is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the high court. The judge determined that schemes to dig the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the permission the previous administration had granted. Today, this victory faces being overturned by an foreign court reporting to no one but the entities filing the suit.

Last August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the United States was established to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. We have little idea how much this could amount to. Which individual is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

On the same day that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK imposed on him following the war in Ukraine. He has previously started suing another European state on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers on his side? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Risks

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic labelled critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That threat has now materialised. In the current period, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, challenging – as in the case of the UK mine – state efforts to halt climate breakdown. Corporations have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP