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What is your understand our democratic process works? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. That's it. However, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, along with the wealthy individuals behind them, have the power to sue nation states for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these panels provide no right of appeal or judicial review. The general public cannot take a case to them, just as our government, including companies headquartered in this country. The door is open exclusively to entities based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

These awards represent not actual losses but funds the panel members determine the company would perhaps have made. The administration may have to rescind the measure. It is discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being brought, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? National sovereignty and democratic governance are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings enacted by parliaments is that this clause has been written – without public consent, and often in conditions of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government later cancelled the permission the Tories had approved. Currently, this victory is under threat by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. Who is representing it against the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a foreign company disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

A Sanctions Case

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it seems likely that he may employ the arbitration process to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: half that nation's yearly budget. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” A consultant on this topic labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. This year, energy and resource corporations have initiated a historic level of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP