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How do you reckon our democratic process functions? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place in secret. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including companies operating from this country. The door is open exclusively to entities registered abroad.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration could be forced to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by legislatures is that this stipulation has been inserted – without public consent, and frequently under a climate of profound opacity – into international trade agreements.

A Concrete Example: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the senior court. The justice ruled that proposals to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the consent the former government had granted. Currently, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the companies filing the suit.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the United States was established to hear it.

The company is suing the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this could amount to. Who is representing it against the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a international entity disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it seems likely that he may employ the tribunal to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has started suing Luxembourg for this reason, claiming $16bn: half that government’s annual revenue. Included in the legal team representing him there? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Risks

The public was told that such things wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” An expert on this issue accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies begin to understand the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with general mockery.

That threat has come to pass. Recently, energy and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP