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Can you reckon our democratic process works? It could be along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that was how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Today, international firms, and the oligarchs behind them, can sue nation states for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these panels allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel rules that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the arbitrators conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be discouraged from enacting future policies along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices taken by elected bodies is that this provision has been written – without public consent, and typically amid conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that proposals to dig the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The new government later cancelled the consent the Tories had issued. Today, this success is under threat by an foreign court reporting to no one but the companies bringing the case.

In August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK enacted against him following the war in Ukraine. He has already started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

International law scholars contend that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these events wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this matter described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning has come to pass. In the current period, energy and mining firms have initiated a historic level of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to prevent global warming. Companies have so far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP