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What is your perceive our democratic process operates? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, overseas companies, along with the billionaires that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses based in this country. Access is granted solely for businesses based overseas.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it may order damages of vast sums, running into billions.

This compensation constitute not actual losses but money the panel members conclude the company would perhaps have made. The administration could be forced to drop the legislation. It is hesitant to passing future laws in that area, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms observe each other, and investment funds finance suits in return for a cut of the awards. The result? Democratic sovereignty and popular rule are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices made by parliaments is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – into trade treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice found that plans to dig the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The Labour government later cancelled the consent the previous administration had issued. Now, this victory is under threat by an secret arbitration panel answering to exclusively the companies bringing the case.

During August, a firm whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. We have little idea how much this sum represents. What legal team is serving as its counsel against the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a foreign company challenges it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation on these grounds, claiming sixteen billion dollars: half that government’s yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Legal experts contend that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That prediction is now a reality. In the current period, energy and mining firms have lodged a historic level of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP