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How do you perceive our democratic process works? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs who own them, have the power to sue nation states for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. Access is granted only to entities based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These sums are based not on real financial harm but money the tribunal officials determine the company could potentially have made. The administration might be compelled to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, worried about being sued.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings made by legislatures is that this stipulation has been written – without public consent, and often in conditions of extreme secrecy – into trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have zero effect on climate commitments. The Labour government subsequently revoked the permission the former government had approved. Today, this victory could be compromised by an foreign court reporting to exclusively the companies bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. Citizens have little idea how much this might be. What legal team is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: half that state's yearly income. Among the counsel representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios were not possible. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An adviser on this issue described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a record number of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have to date won vast sums by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP