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How do you understand our democratic process operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

Nowadays, overseas companies, or the oligarchs that control them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are held away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even businesses based in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

This compensation are based not on real financial harm but funds the panel members decide the company could potentially have made. The state may have to abandon its policy. It is hesitant to enacting future policies along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as firms learn from each other, and investment funds fund legal actions in exchange for a cut of the takings. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices made by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice ruled that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the previous administration had issued. Today, this legal outcome could be compromised by an foreign court answering to only the companies petitioning it.

In August, a company whose final controllers are located in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the United States was set up to hear it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, demanding $16bn: an amount representing half government’s annual revenue. Included in the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these events wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An expert on this matter described activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have initiated a record number of suits against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to halt global warming. Firms have so far won vast sums by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP