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Can you understand our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. Well, that used to be how it used to work. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals who own them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. They are open only to businesses registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums represent not tangible damages but compensation the tribunal officials conclude the company could potentially have made. The government may have to rescind the measure. It becomes hesitant to passing future laws along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being initiated, as companies observe each other, and hedge funds fund legal actions in exchange for a share of the settlements. The consequence? Sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the choices taken by legislatures is that this clause has been inserted – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the permission the Tories had issued. Now, this success is under threat by an foreign court accountable to only the companies filing the suit.

In August, a firm whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was set up to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this might be. Who is representing it against the British government? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case so far, but it appears probable that he may employ the tribunal to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has previously started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Among the counsel representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that these events wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this issue described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have filed a record number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to halt climate breakdown. Firms have thus far won $114bn by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP