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What is your perceive our democratic process works? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that’s how it used to work. No longer.

The Rise of Secret Arbitration Panels

Today, international firms, and the wealthy individuals who own them, have the power to sue governments for the regulations they pass, at private courts composed of commercial attorneys. These proceedings take place in secret. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including businesses operating from this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company could potentially have made. The government may have to drop the legislation. It will be hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as corporations learn from each other, and investment funds finance suits in return for a portion of the settlements. The outcome? Sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge determined that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the licence the previous administration had approved. Now, this legal outcome is under threat by an offshore tribunal accountable to only the companies petitioning it.

Last August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. The previous week a dispute settlement body in the US capital was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he may employ the arbitration process to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of state's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this issue described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat has now materialised. This year, fossil fuel and mining firms have lodged a record number of suits against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to stop climate breakdown. Firms have so far won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP