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How do you understand our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that’s how it used to work. Not anymore.

The Emergence of Secret Arbitration Panels

Today, international firms, or the billionaires who own them, have the power to sue governments for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, including companies operating from this country. They are open only to corporations based overseas.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums represent not actual losses but funds the tribunal officials decide the company might otherwise have made. The government may have to rescind the measure. It becomes hesitant to passing future laws along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of cases are being filed, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the awards. The outcome? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions enacted by parliaments is that this clause has been inserted – without public consent, and typically amid conditions of profound opacity – within trade treaties.

A Concrete Case: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government subsequently revoked the consent the previous administration had issued. Today, this success faces being overturned by an offshore tribunal answering to exclusively the corporations bringing the case.

In August, a firm whose final controllers are located in the tax haven initiated proceedings versus the UK government. Last week a tribunal in the United States was set up to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. What legal team is representing it in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him following the invasion of Ukraine. He has filed a claim against a small nation on these grounds, claiming $16bn: equivalent to half of nation's annual revenue. Part of the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that these events were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of cases against nations rich and poor, opposing – similar to the UK mine – official measures to stop environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP