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How do you perceive our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, along with the billionaires behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place in secret. Unlike our courts, these panels grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. Access is granted only to businesses registered abroad.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but funds the panel members determine the company would perhaps have made. The government might be compelled to abandon its policy. It becomes discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as companies learn from each other, and investment funds finance suits for a share of a share of the settlements. The outcome? Sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings made by elected bodies is that this clause has been inserted – absent public approval, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Last year, activists won a great victory at the High Court. The judge found that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Now, this legal outcome is under threat by an secret arbitration panel accountable to no one but the entities bringing the case.

Last August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this might be. Which individual is representing it against the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the panel on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK levied against him after the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these scenarios were not possible. Years ago, a government leader, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this topic labelled critics of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. In the current period, energy and mining firms have lodged a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That represents the combined GDP