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What is your understand our democratic process works? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Legislation is upheld by the courts. End of story. Yet, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, along with the wealthy individuals behind them, can sue nation states for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies based in this country. Access is granted exclusively to corporations registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums represent not real financial harm but money the tribunal officials decide the company could potentially have made. The administration could be forced to abandon its policy. It is discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and hedge funds finance suits for a share of a share of the awards. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the rulings taken by legislatures is that this stipulation has been written – without public consent, and often in conditions of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the permission the Tories had granted. Today, this success is under threat by an foreign court answering to no one but the corporations bringing the case.

In August, a firm whose final controllers are based in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was convened to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to commence operations. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a overseas corporation disputes it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has started suing another European state for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Included in the legal team representing him there? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as security for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these events wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this matter accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations start to realise the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, energy and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Firms have to date won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP