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Can you understand our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, foreign corporations, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, including companies operating from this country. The door is open only to corporations based overseas.

When a secret court finds that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but compensation the panel members conclude the company could potentially have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as firms take cues from each other, and private equity finance suits for a share of a share of the takings. The consequence? National sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the choices made by elected bodies is that this clause has been written – absent public approval, and often in a climate of profound opacity – within international trade agreements.

A Specific Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the High Court. The justice found that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the consent the Tories had issued. Currently, this success could be compromised by an offshore tribunal reporting to only the corporations filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the US capital was convened to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to proceed. The public has no clear indication how much this sum represents. Who is representing it in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day 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 Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding $16bn: equivalent to half of nation's yearly income. Part of the lawyers representing him there? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An expert on this issue described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with general mockery.

That warning is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have thus far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP