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Can you understand our democratic process operates? It could be something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, along with the billionaires behind them, can sue nation states for the regulations they pass, at private courts made up of business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or legal review. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to corporations registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation are based not on actual losses but compensation the arbitrators conclude the company might otherwise have made. The government may have to drop the legislation. It is discouraged from enacting future policies in that area, due to the risk of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a share of the takings. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings enacted by parliaments is that this clause has been incorporated – without public consent, and often in a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The new government then withdrew the licence the Tories had approved. Now, this victory could be compromised by an offshore tribunal answering to no one but the companies petitioning it.

Last August, a company whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

This firm is suing the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Which individual is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the invasion of Ukraine. He has started suing Luxembourg on these grounds, demanding a colossal sum: equivalent to half of state's yearly income. Included in the lawyers representing him there? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s hesitation in utilising seized state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That prediction has come to pass. In the current period, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, opposing – as in the case of the UK mine – government attempts to stop climate breakdown. Corporations have thus far won vast sums by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP