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What is your understand our political system functions? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held in secret. Unlike our courts, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. The door is open only to entities based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but funds the tribunal officials conclude the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from passing future laws in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being filed, as firms observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The result? National sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the choices made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that plans to open the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government later cancelled the permission the Tories had granted. Now, this victory could be compromised by an secret arbitration panel answering to no one but the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. The public has no idea how much this could amount to. Which individual is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he may employ the tribunal to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against another European state for this reason, seeking sixteen billion dollars: half that state's yearly budget. Among the counsel representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s delay in using frozen state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these events could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter accused activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and mining firms have lodged a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have thus far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP