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Can you perceive our political system functions? It could be something like this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills become law. The law are enforced by the courts. End of story. However, that’s how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, and the billionaires who own them, have the power to sue nation states for the laws they pass, at private courts staffed by corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, including companies operating from this country. They are open only to entities operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it may order damages of vast sums, potentially billions.

These awards are based not on tangible damages but funds the tribunal officials determine the company would perhaps have made. The government may have to abandon its policy. It is deterred from passing future laws of a similar nature, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a cut of the awards. The outcome? National sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices taken by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer ruled that plans to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on national carbon targets. The new government then withdrew the consent the former government had granted. Now, this success faces being overturned by an secret arbitration panel reporting to exclusively the corporations bringing the case.

Last August, a corporate entity whose final controllers reside in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this might be. What legal team is representing it in opposition to the state? An elected representative, and former attorney-general in the previous government, that great patriot the MP. The administration passes a law, the high court validates it, then a international entity challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the invasion of Ukraine. He has already filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of state's yearly budget. Part of 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 procrastination in utilising seized oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that these scenarios were not possible. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That warning has now materialised. Recently, oil and gas and mining firms have lodged a record number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP