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Can you reckon our democratic process operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Today, foreign corporations, and the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings take place behind closed doors. Unlike our courts, these panels grant no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not actual losses but funds the arbitrators conclude the company could potentially have made. The government could be forced to abandon its policy. It becomes discouraged from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as corporations observe each other, and private equity finance suits in return for a share of the settlements. The result? National sovereignty and democratic governance are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions taken by elected bodies is that this clause has been written – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the former government had issued. Now, this legal outcome is under threat by an foreign court answering to no one but the companies bringing the case.

During August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission 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 member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it seems likely that he may employ the tribunal to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that nation's yearly budget. Part of the lawyers on his side? Cherie Blair, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured 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 investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction has now materialised. In the current period, oil and gas and extraction companies have lodged a record number of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to stop climate breakdown. Corporations have so far won vast sums via ISDS, of which oil majors have obtained the majority. That represents the combined GDP