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How do you perceive our democratic process works? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Rise of Secret Arbitration Panels

Today, international firms, and the billionaires who own them, are able to litigate against governments for the laws they pass, at private courts composed of commercial attorneys. Such disputes are held in secret. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

This compensation are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The government could be forced to rescind the measure. It is deterred from passing future laws of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and investment funds finance suits in exchange for a share of the takings. The consequence? National sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions taken by parliaments is that this provision has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer determined that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the previous administration had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies filing the suit.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to go ahead. We have no clear indication how much this could amount to. What legal team is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK levied against him after the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: half that government’s annual revenue. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that such things were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic described campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations grasp the authority they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to halt climate breakdown. Companies have to date won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP