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How do you reckon our political system operates? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, or the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses based in this country. Access is granted solely for corporations registered abroad.

When a secret court finds that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

This compensation constitute not tangible damages but compensation the panel members determine the company might otherwise have made. The state could be forced to rescind the measure. It becomes discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of legal actions are being filed, as corporations take cues from each other, and investment funds fund legal actions for a share of a portion of the awards. The result? National sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings taken by legislatures is that this provision has been written – without public consent, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the previous administration had issued. Currently, this legal outcome is under threat by an secret arbitration panel accountable to only the corporations bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. We have little idea how much this could amount to. What legal team is serving as its counsel challenging the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it seems likely that he will utilise the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has filed a claim against another European state on these grounds, demanding sixteen billion dollars: half that nation's yearly budget. Included in the legal team representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

The public was told that these events wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this issue described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. In the current period, oil and gas and mining firms have filed a historic level of claims against nations rich and poor, challenging – similar to the UK mine – government attempts to stop environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP