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What is your reckon our democratic process functions? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses based in this country. The door is open only to businesses based overseas.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but funds the arbitrators determine the company would perhaps have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being filed, as companies take cues from each other, and private equity fund legal actions in return for a cut of the settlements. The consequence? National sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings taken by legislatures is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer ruled that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The new government then withdrew the licence the former government had granted. Currently, this success is under threat by an foreign court accountable to exclusively the companies filing the suit.

During August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in the United States was convened to consider the case.

This firm is suing the UK for the profits it might have made if the mine had been allowed to commence operations. We have no idea how much this sum represents. What legal team is representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case so far, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, demanding $16bn: an amount representing half nation's yearly budget. Among the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations grasp the power they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. This year, oil and gas and resource corporations have lodged a record number of suits against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP