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What is your reckon our system of government works? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that used to be how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, along with the wealthy individuals behind them, can sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including enterprises operating from this country. They are open solely for businesses operating from foreign soil.

When a secret court rules that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but money the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It will be discouraged from enacting future policies of a similar nature, worried about being sued.

A System Running Rampant

Historically high figures of disputes are being initiated, as companies learn from each other, and hedge funds finance suits for a share of a cut of the takings. The outcome? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the rulings made by elected bodies is that this clause has been written – without public consent, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the consent the former government had issued. Currently, this victory 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 tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to go ahead. Citizens have little idea how much this could amount to. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court validates it, then a international entity challenges it through an secretive private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: half that nation's yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An adviser on this matter described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “once firms begin to understand the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That prediction has now materialised. In the current period, oil and gas and extraction companies have lodged a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – official measures to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That equates to the combined GDP