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Can you perceive our political system works? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that used to be how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, and the oligarchs behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

These awards constitute not tangible damages but money the arbitrators decide the company would perhaps have made. The state may have to drop the legislation. It is hesitant to passing future laws of a similar nature, worried about being sued.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions for a share of a share of the settlements. The consequence? Sovereignty and popular rule are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and frequently under a climate of extreme secrecy – into international trade agreements.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The new government then withdrew the permission the previous administration had issued. Today, this success is under threat by an foreign court reporting to no one but the companies filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was set up to hear it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this might be. Who is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously started suing another European state with similar intent, demanding $16bn: equivalent to half of state's yearly budget. Among the legal team representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s delay in utilising seized oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That threat is now a reality. Recently, energy and resource corporations have filed a historic level of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to stop global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP