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Can you understand our democratic process works? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Well, that was how it used to work. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals that control them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are conducted in secret. Unlike our courts, these panels allow no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open exclusively to corporations registered abroad.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These sums represent not actual losses but funds the tribunal officials decide the company might otherwise have made. The government could be forced to drop the legislation. It is discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being brought, as firms observe each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings enacted by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer determined that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The new government subsequently revoked the licence the former government had approved. Currently, this victory could be compromised by an secret arbitration panel accountable to exclusively the entities filing the suit.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have little idea how much this sum represents. Which individual is representing it against the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case to date, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him following the Russian aggression. He has initiated proceedings against another European state with similar intent, claiming $16bn: an amount representing half state's annual revenue. Among the counsel representing him there? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this issue accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. Recently, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, challenging – similar to the Whitehaven project – official measures to halt global warming. Corporations have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP