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How do you reckon our democratic process operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, international firms, and the billionaires who own them, can sue governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, including businesses operating from this country. Access is granted solely for corporations based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on actual losses but money the tribunal officials conclude the company could potentially have made. The state may have to rescind the measure. It becomes hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of cases are being initiated, as companies learn from each other, and private equity fund legal actions for a share of a share of the awards. The result? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the decisions enacted by legislatures is that this provision has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The judge found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the permission the Tories had approved. Currently, this success is under threat by an offshore tribunal accountable to no one but the companies bringing the case.

In August, a firm whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. The public has little idea how much this could amount to. Who is representing it against the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it appears probable that he will utilise the ISDS mechanism to fight the restrictions the UK imposed on him after the war in Ukraine. He has already initiated proceedings against another European state on these grounds, demanding a colossal sum: an amount representing half state's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” An expert on this matter described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “when companies grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That prediction has now materialised. This year, oil and gas and extraction companies have lodged a record number of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Firms have so far won $114bn by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP