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Can you understand our democratic process operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at private courts made up of business advocates. The cases are held in secret. Unlike our courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. They are open exclusively to businesses registered abroad.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it can award damages of vast sums, even billions.

These sums are based not on tangible damages but money the panel members decide the company might otherwise have made. The state could be forced to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as firms observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The outcome? National sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions enacted by parliaments is that this provision has been written – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the consent the Tories had issued. Currently, this legal outcome is under threat by an secret arbitration panel reporting to no one but the companies filing the suit.

During August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. We have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, the noted patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, seeking sixteen billion dollars: half that nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these scenarios could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That warning has come to pass. This year, fossil fuel and resource corporations have initiated a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to halt global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP