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What is your reckon our democratic process functions? Maybe something like this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Today, foreign corporations, or the billionaires that control them, are able to litigate against governments for the policies they pass, at private courts made up of commercial attorneys. These proceedings take place behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including businesses operating from this country. The door is open solely for businesses operating from foreign soil.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it can award compensation of vast sums, even billions.

These awards represent not real financial harm but compensation the tribunal officials decide the company could potentially have made. The government may have to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the awards. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices enacted by legislatures is that this clause has been written – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the high court. The justice found that proposals to open the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the consent the former government had issued. Currently, this success could be compromised by an offshore tribunal answering to no one but the entities bringing the case.

In August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Recently a arbitration panel in the US capital was set up to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this sum represents. What legal team is representing it in opposition to the state? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know scarce of the case at present, but it seems likely that he will utilise the tribunal to contest the sanctions the UK levied against him following the war in Ukraine. He has previously started suing another European state for this reason, demanding $16bn: half that nation's yearly budget. Among the counsel representing him there? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that such things wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this matter labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has come to pass. This year, fossil fuel and resource corporations have lodged a historic level of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to stop global warming. Companies have so far won vast sums by using ISDS, of which energy giants have secured $84bn. That represents the combined GDP