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What is your reckon our democratic process works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, and the billionaires who own them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these bodies grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but funds the panel members determine the company might otherwise have made. The government may have to drop the legislation. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Running Rampant

Record numbers of disputes are being brought, as companies learn from each other, and investment funds finance suits for a share of a cut of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by elected bodies is that this provision has been written – absent public approval, and typically amid conditions of extreme secrecy – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The justice determined that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration then withdrew the permission the former government had granted. Currently, this victory faces being overturned by an secret arbitration panel accountable to only the entities filing the suit.

In August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this might be. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he may employ the tribunal to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, claiming $16bn: an amount representing half government’s annual revenue. Among the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that such things were not possible. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has now materialised. In the current period, energy and mining firms have filed a unprecedented number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured $84bn. That represents the combined GDP