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What is your reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that’s how it used to work. No longer.

The Emergence of Secret Tribunals

In the modern era, international firms, and the oligarchs who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are held in secret. In contrast to domestic courts, these panels grant no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises based in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums constitute not actual losses but compensation the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It becomes hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies take cues from each other, and hedge funds finance suits for a share of a share of the awards. The outcome? National sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the decisions enacted by legislatures is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Last year, activists achieved a major legal triumph at the high court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The incoming administration later cancelled the permission the former government had granted. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations petitioning it.

During August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no clear indication how much this might be. What legal team is representing it in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a foreign company contests it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly budget. Part of the counsel on his side? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these scenarios were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “as corporations grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and mining firms have initiated a historic level of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have to date won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP