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How do you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, international firms, and the oligarchs who own them, have the power to sue nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted in secret. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies based in this country. The door is open solely for entities based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions, running into billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms observe each other, and private equity fund legal actions for a share of a portion of the awards. The result? Sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions made by parliaments is that this stipulation has been inserted – without democratic mandate, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the High Court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the permission the Tories had granted. Now, this victory is under threat by an foreign court answering to no one but the entities bringing the case.

During August, a company whose ultimate owners reside in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is acting on its behalf against the state? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against another European state with similar intent, demanding a colossal sum: half that nation's annual revenue. Among the lawyers representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An expert on this topic described critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations grasp the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. This year, fossil fuel and resource corporations have filed a record number of claims against nations both wealthy and developing, challenging – as in the case of the UK mine – official measures to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP