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How do you understand our system of government operates? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. End of story. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the wealthy individuals behind them, can sue governments for the regulations they pass, at private courts composed of corporate lawyers. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for entities operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as firms observe each other, and investment funds fund legal actions in return for a cut of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices made by parliaments is that this provision has been inserted – absent public approval, and typically amid a climate of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration later cancelled the licence the Tories had granted. Today, this victory could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

Last August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf against the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he’ll use the tribunal to fight the penalties the UK levied against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” A consultant on this matter accused critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That prediction has now materialised. Recently, fossil fuel and extraction companies have initiated a record number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP