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What is your understand our political system works? It could be similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, along with the wealthy individuals that control them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it can award compensation of vast sums, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to abandon its policy. It will be discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being brought, as firms learn from each other, and hedge funds fund legal actions for a share of a cut of the settlements. The outcome? Sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings taken by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the high court. The judge ruled that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The new government then withdrew the permission the former government had granted. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the companies bringing the case.

Last August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it appears probable that he may employ the tribunal to contest the sanctions the UK levied against him following the war in Ukraine. He has started suing another European state for this reason, claiming $16bn: an amount representing half nation's yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that such things could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Predictions that “when companies begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with general mockery.

That threat has come to pass. Recently, energy and extraction companies have initiated a record number of claims against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP