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What is your understand our democratic process works? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. That's it. However, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Arbitration Panels

Nowadays, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the laws they pass, at private courts staffed by business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open exclusively to entities registered abroad.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but money the panel members conclude the company would perhaps have made. The administration could be forced to abandon its policy. It is discouraged from passing future laws along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as companies take cues from each other, and private equity fund legal actions in return for a portion of the settlements. The result? National sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings taken by elected bodies is that this clause has been inserted – without public consent, and frequently under conditions of profound opacity – within international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge found that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government then withdrew the consent the former government had approved. Today, this legal outcome is under threat by an offshore tribunal reporting to no one but the entities filing the suit.

In August, a firm whose final controllers reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. What legal team is acting on its behalf challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a foreign company contests it through an secretive offshore tribunal, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, seeking $16bn: half that government’s yearly budget. Among the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Threats

We were assured that such things were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter accused campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “once firms begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That threat is now a reality. This year, oil and gas and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – official measures to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP