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How do you perceive our democratic process works? Perhaps along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies operating from this country. They are open exclusively to businesses based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as firms observe each other, and investment funds fund legal actions for a share of a portion of the awards. The result? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and often in conditions of profound opacity – inside trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The presiding officer found that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The Labour government then withdrew the permission the former government had issued. Currently, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the entities filing the suit.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in the United States was set up to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court supports it, then a foreign company challenges it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already started suing a small nation for this reason, claiming $16bn: equivalent to half of nation's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these scenarios could not occur. Previously, a government leader, championing the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. In the current period, oil and gas and resource corporations have filed a historic level of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – government attempts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP