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How do you perceive our democratic process functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These awards represent not real financial harm but money the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It will be deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of cases are being brought, as firms learn from each other, and private equity bankroll lawsuits in return for a portion of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by elected bodies is that this clause has been incorporated – without public consent, and typically amid conditions of profound opacity – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that schemes to dig the first major coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the previous administration had approved. Now, this legal outcome could be compromised by an secret arbitration panel answering to no one but the companies petitioning it.

Last August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

The company is suing the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no idea how much this sum represents. What legal team is acting on its behalf against the state? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a international entity contests it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against Luxembourg for this reason, demanding $16bn: an amount representing half nation's yearly income. Among the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That threat is now a reality. This year, oil and gas and resource corporations have filed a historic level of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to halt environmental catastrophe. Firms have thus far won vast sums through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP