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What is your perceive our system of government operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the oligarchs behind them, can sue elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these panels allow no avenue for appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but compensation the panel members conclude the company might otherwise have made. The administration might be compelled to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as companies observe each other, and private equity finance suits in return for a cut of the awards. The result? Democratic sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices made by legislatures is that this provision has been incorporated – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The new government then withdrew the consent the Tories had approved. Now, this legal outcome could be compromised by an foreign court accountable to exclusively the entities bringing the case.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was convened to consider the case.

This firm is suing the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is acting on its behalf challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable private court, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him following the war in Ukraine. He has already started suing a small nation for this reason, claiming a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers acting for him in that case? a prominent lawyer, married to the ex-UK leader.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that such things were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were greeted by widespread derision.

That prediction has now materialised. In the current period, energy and extraction companies have lodged a record number of cases against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to stop global warming. Corporations have thus far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP