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What is your understand our democratic process works? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. However, that used to be how it once functioned. Those days are over.

The Rise of Secret Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, have the power to sue governments for the policies they pass, at private courts made up of corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. Access is granted only to entities operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but money the panel members decide the company would perhaps have made. The government could be forced to abandon its policy. It will be discouraged from introducing similar legislation in that area, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a cut of the settlements. The result? National sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices taken by elected bodies is that this stipulation has been incorporated – absent public approval, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge determined that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the permission the previous administration had approved. Now, this victory could be compromised by an secret arbitration panel reporting to only the corporations petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in the US capital was convened to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf against the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The state enacts a policy, the high court validates it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK levied against him following the invasion of Ukraine. He has started suing a small nation for this reason, seeking a colossal sum: equivalent to half of state's yearly income. Included in the lawyers on his side? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these scenarios could not occur. Years ago, a senior politician, championing the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Warnings 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 dismissed with scepticism.

That warning is now a reality. This year, fossil fuel and mining firms have filed a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have to date won $114bn by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP