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Can you perceive our system of government operates? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. Yet, that used to be how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the oligarchs behind them, can sue governments for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even businesses based in this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it may order damages of hundreds of millions of pounds, even billions.

These sums represent not actual losses but compensation the tribunal officials conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It will be deterred from passing future laws in that area, for fear of being sued.

A System Running Rampant

Record numbers of cases are being brought, as companies take cues from each other, and investment funds fund legal actions for a share of a portion of the awards. The outcome? Sovereignty and democratic governance are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices taken by legislatures is that this provision has been inserted – without democratic mandate, and frequently under conditions of total confidentiality – into international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that proposals to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The new government then withdrew the consent the former government had issued. Now, this legal outcome is under threat by an secret arbitration panel accountable to only the companies filing the suit.

In August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was convened to hear it.

The company is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is representing it against the state? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK levied against him after the war in Ukraine. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that government’s yearly income. Part of the lawyers on his side? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that such things wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “when companies start to realise the authority they now possess, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That warning has now materialised. Recently, energy and resource corporations have lodged a unprecedented number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – government attempts to halt global warming. Corporations have thus far won vast sums via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP