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How do you reckon our system of government operates? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs who own them, can sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or legal review. You or I are unable to file a case to them, nor can our government, or even businesses based in this country. Access is granted exclusively to entities registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums are based not on tangible damages but funds the tribunal officials determine the company would perhaps have made. The state may have to abandon its policy. It will be discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and investment funds finance suits in exchange for a share of the awards. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government later cancelled the licence the previous administration had issued. Today, this legal outcome is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

In August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit against the UK government. Recently a tribunal in the United States was convened to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this might be. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has already started suing Luxembourg for this reason, claiming $16bn: half that nation's yearly income. Included in the legal team on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from 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 funds Ukraine urgently requires.

Empty Promises and Escalating Risks

The public was told that such things wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this topic described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “when companies start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That prediction is now a reality. In the current period, oil and gas and extraction companies have lodged a historic level of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP