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How do you understand our political system functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Rise of Secret Arbitration Panels

Today, overseas companies, along with the wealthy individuals behind them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to businesses registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, running into billions.

This compensation are based not on real financial harm but money the tribunal officials decide the company would perhaps have made. The state might be compelled to drop the legislation. It will be discouraged from passing future laws of a similar nature, worried about being sued.

A System Running Rampant

Record numbers of disputes are being brought, as corporations observe each other, and investment funds finance suits in return for a share of the awards. The outcome? Sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions taken by legislatures is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the High Court. The judge determined that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the permission the former government had issued. Currently, this legal outcome could be compromised by an offshore tribunal answering to no one but the companies filing the suit.

In August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim against the UK government. Last week a tribunal in the United States was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. Which individual is representing it against the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company disputes it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, claiming a colossal sum: equivalent to half of state's yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these scenarios could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An expert on this issue accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations begin to understand the power they now possess, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That warning has now materialised. In the current period, oil and gas and resource corporations have lodged a record number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won $114bn via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP