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How do you perceive our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Advent of Secret Tribunals

In the modern era, foreign corporations, along with the oligarchs who own them, have the power to sue governments for the regulations they pass, at private courts composed of business advocates. The cases take place behind closed doors. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises based in this country. They are open solely for entities based overseas.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but compensation the panel members determine the company would perhaps have made. The administration might be compelled to abandon its policy. It will be discouraged from passing future laws in that area, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as firms observe each other, and investment funds finance suits in exchange for a portion of the awards. The result? National sovereignty and democratic governance are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices taken by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on climate commitments. The new government later cancelled the licence the previous administration had granted. Currently, this success is under threat by an offshore tribunal accountable to only the companies bringing the case.

In August, a firm whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. Who is acting on its behalf challenging the state? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation challenges it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he will utilise the arbitration process to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, claiming sixteen billion dollars: an amount representing half state's yearly budget. Included in the counsel acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Costs

We were assured that these events were not possible. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “when companies start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That threat has now materialised. This year, oil and gas and mining firms have lodged a unprecedented number of cases against nations rich and poor, challenging – similar to the UK mine – government attempts to prevent climate breakdown. Companies have to date 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