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Can you reckon our political system operates? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. Yet, that was how it used to work. No longer.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, and the billionaires behind them, can sue governments for the regulations they pass, at private courts made up of business advocates. Such disputes are held in secret. Unlike our courts, these panels allow no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises based in this country. They are open solely for entities registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums represent not actual losses but money the panel members conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as companies take cues from each other, and hedge funds finance suits in return for a share of the awards. The result? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings enacted by legislatures is that this clause has been written – without democratic mandate, and often in conditions of extreme secrecy – inside trade treaties.

A Specific Case: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the high court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no consequence on climate commitments. The new government later cancelled the consent the previous administration had granted. Now, this victory faces being overturned by an offshore tribunal reporting to only the corporations bringing the case.

In August, a company whose ultimate owners are based in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. The public has no idea how much this sum represents. What legal team is acting on its behalf against the state? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court supports it, then a foreign company challenges it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: half that government’s yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Costs

The public was told that these events were not possible. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a case in the past.” An expert on this matter labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies start to realise the authority bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning has come to pass. In the current period, energy and resource corporations have lodged a record number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Companies have to date won vast sums by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP