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Can you perceive our political system operates? Perhaps along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, international firms, and the wealthy individuals who own them, can sue nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these panels provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open solely for businesses based overseas.

When a secret court determines 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 represent not tangible damages but money the tribunal officials decide the company could potentially have made. The state may have to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A Process Running Rampant

Unprecedented levels of cases are being brought, as firms observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The result? National sovereignty and democratic governance are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Real-World Case: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice found that plans to open the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on national carbon targets. The new government later cancelled the licence the previous administration had approved. Now, this victory faces being overturned by an secret arbitration panel reporting to no one but the entities petitioning it.

In August, a firm whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. Who is serving as its counsel in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity disputes it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it appears probable that he may employ the arbitration process to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against a small nation with similar intent, demanding $16bn: half that nation's yearly income. Included in the legal team on his side? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Escalating Costs

The public was told that such things could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An expert on this topic accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with scepticism.

That warning has come to pass. In the current period, oil and gas and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have so far won $114bn by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP