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Can you reckon our democratic process functions? Maybe something like this. We elect MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. That's it. However, that’s how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises based in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums constitute not tangible damages but funds the panel members conclude the company could potentially have made. The administration may have to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? National sovereignty and democracy are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings made by legislatures is that this provision has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government subsequently revoked the permission the previous administration had granted. Now, this victory is under threat by an foreign court reporting to only the companies filing the suit.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in Washington DC was established to hear it.

The claimant is suing the UK for the profits it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. Which individual is acting on its behalf against the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The administration enacts a policy, the domestic court supports it, then a foreign company disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it appears probable that he may employ the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has already filed a claim against a small nation for this reason, demanding $16bn: an amount representing half state's annual revenue. Part of the lawyers representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told 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 trade deal after trade deal and we have never seen a issue in the past.” An adviser on this topic accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by scepticism.

That threat is now a reality. In the current period, energy and resource corporations have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to halt global warming. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP