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What is your perceive our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. However, that used to be how it once functioned. No longer.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, and the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including enterprises based in this country. Access is granted only to entities based overseas.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These awards are based not on real financial harm but money the tribunal officials determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and private equity bankroll lawsuits for a share of a share of the takings. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings enacted by legislatures is that this clause has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – within international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The new government later cancelled the permission the Tories had issued. Today, this victory is under threat by an foreign court reporting to only the companies bringing the case.

Last August, a firm whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Who is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Risks

The public was told that these events could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this issue described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. In the current period, energy and extraction companies have initiated a historic level of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP