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What is your perceive our political system operates? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Rise of Secret Arbitration Panels

In the modern era, overseas companies, along with the billionaires that control them, have the power to sue nation states for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these panels grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including companies based in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but compensation the panel members conclude the company would perhaps have made. The state might be compelled to rescind the measure. It becomes discouraged from enacting future policies along the same lines, due to the risk of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as corporations take cues from each other, and investment funds bankroll lawsuits in exchange for a share of the awards. The consequence? Democratic sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under a climate of total confidentiality – inside international trade agreements.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice ruled that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government then withdrew the permission the former government had granted. Today, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the companies bringing the case.

In August, a company whose ultimate owners reside in the offshore financial centre filed a lawsuit against the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. What legal team is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an secretive arbitration panel, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the panel on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK imposed on him after the war in Ukraine. He has previously started suing Luxembourg for this reason, demanding $16bn: equivalent to half of government’s annual revenue. Part of the counsel acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these scenarios could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this issue described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies grasp the power bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with widespread derision.

That warning has now materialised. This year, energy and extraction companies have filed a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have thus far won vast sums through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP