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How do you perceive our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Rise of Secret Arbitration Panels

Today, foreign corporations, along with the oligarchs who own them, can sue governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. They are open exclusively to entities registered abroad.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

This compensation represent not real financial harm but money the panel members decide the company would perhaps have made. The administration could be forced to rescind the measure. It is deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as corporations learn from each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to 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 clause has been written – absent public approval, and typically amid a climate of extreme secrecy – into international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the permission the former government had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to only the entities bringing the case.

Last August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this might be. What legal team is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already started suing Luxembourg for this reason, demanding $16bn: equivalent to half of government’s annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these scenarios could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue labelled activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning has now materialised. Recently, fossil fuel and extraction companies have filed a historic level of cases against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP