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How do you perceive our system of government operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. End of story. However, that was how it used to work. No longer.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, along with the oligarchs who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises operating from this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but money the arbitrators conclude the company would perhaps have made. The government might be compelled to drop the legislation. It is deterred from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as corporations observe each other, and investment funds finance suits in exchange for a portion of the takings. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without public consent, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Last year, activists secured a significant win at the high court. The judge ruled that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government subsequently revoked the consent the previous administration had approved. Currently, this success is under threat by an secret arbitration panel reporting to only the corporations filing the suit.

Last August, a company whose ultimate owners are located in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. The public has no idea how much this could amount to. Who is serving as its counsel against the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, demanding $16bn: half that nation's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine stems 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 money Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these scenarios could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this matter described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That threat has come to pass. This year, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to prevent climate breakdown. Corporations have to date won $114bn by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP