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Can you understand our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that used to be how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, international firms, along with the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, including companies operating from this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but money the panel members decide the company might otherwise have made. The government may have to rescind the measure. It becomes hesitant to passing future laws in that area, for fear of facing litigation.

A System Running Rampant

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – within trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the consent the former government had granted. Today, this success could be compromised by an secret arbitration panel reporting to only the companies filing the suit.

Last August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it appears probable that he may employ the arbitration process to contest the sanctions the UK levied against him after the Russian aggression. He has already filed a claim against another European state with similar intent, seeking $16bn: half that state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these events were not possible. Previously, a government leader, promoting the largest and riskiest of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” An expert on this matter labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations start to realise the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. Recently, energy and resource corporations have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – like the example of the UK mine – state efforts to prevent environmental catastrophe. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP