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How do you perceive our democratic process operates? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, along with the wealthy individuals behind them, can sue governments for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies headquartered in this country. They are open solely for corporations based overseas.

When a secret court rules that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but money the panel members decide the company would perhaps have made. The administration may have to drop the legislation. It is deterred from passing future laws of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms observe each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had approved. Today, this victory is under threat by an offshore tribunal reporting to only the companies bringing the case.

During August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in the US capital was set up to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no idea how much this might be. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The administration passes a law, the domestic court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK levied against him after the invasion of Ukraine. He has already filed a claim against Luxembourg with similar intent, demanding a colossal sum: half that government’s yearly budget. Among the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen state funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these scenarios were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations grasp the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. In the current period, oil and gas and resource corporations have initiated a historic level of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to prevent global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP