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Can you perceive our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Nowadays, international firms, and the wealthy individuals that control them, are able to litigate against elected administrations for the policies they pass, at private courts composed of commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to businesses based overseas.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

These sums represent not actual losses but compensation the tribunal officials conclude the company would perhaps have made. The state might be compelled to drop the legislation. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being brought, as firms take cues from each other, and private equity bankroll lawsuits in return for a cut of the awards. The result? Sovereignty and democratic governance are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings made by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of profound opacity – inside trade treaties.

A Real-World Case: The Cumbrian Coalmine

Last year, activists secured a significant win at the High Court. The judge found that schemes to open the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the licence the previous administration had granted. Today, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the entities filing the suit.

During August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has previously started suing Luxembourg with similar intent, demanding $16bn: half that state's annual revenue. Included in the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that these events could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms begin to understand the authority they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That warning is now a reality. In the current period, oil and gas and extraction companies have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – government attempts to prevent global warming. Companies have so far won vast sums via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP