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Can you perceive our democratic process functions? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that was how it used to work. No longer.

The Rise of Secret Tribunals

In the modern era, international firms, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, including enterprises operating from this country. The door is open solely for entities based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These sums constitute not actual losses but compensation the panel members decide the company could potentially have made. The administration could be forced to rescind the measure. It becomes hesitant to enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as firms take cues from each other, and hedge funds finance suits in exchange for a share of the takings. The outcome? Sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices taken by legislatures is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the High Court. The justice determined that plans to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The Labour government then withdrew the consent the Tories had granted. Now, this victory is under threat by an secret arbitration panel accountable to only the companies filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Case

On the same day that the panel on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him following the war in Ukraine. He has already initiated proceedings against another European state on these grounds, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this matter accused campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms grasp the influence they now possess, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That threat has now materialised. Recently, fossil fuel and mining firms have filed a unprecedented number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – official measures to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP