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Can you reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Rise of Secret Arbitration Panels

Today, foreign corporations, and the oligarchs behind them, have the power to sue nation states for the policies they pass, at private courts composed of corporate lawyers. These proceedings take place in secret. Unlike our courts, these bodies grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it can award damages of vast sums, even billions.

This compensation represent not tangible damages but money the tribunal officials determine the company could potentially have made. The government may have to abandon its policy. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and hedge funds finance suits in return for a cut of the settlements. The consequence? Sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions enacted by legislatures is that this clause has been written – without democratic mandate, and often in a climate of extreme secrecy – within international trade agreements.

A Concrete Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that proposals to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the permission the previous administration had issued. Today, this legal outcome faces being overturned by an foreign court answering to only the corporations filing the suit.

In August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was established to consider the case.

The company is suing the UK for the money it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this might be. What legal team is representing it challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the court on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it is highly possible that he’ll use the tribunal to challenge the penalties the UK levied against him following the invasion of Ukraine. He has already filed a claim against another European state for this reason, claiming a colossal sum: half that nation's yearly budget. Included in the lawyers representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

Politicians promised that such things wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An expert on this matter labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, fossil fuel and mining firms have filed a historic level of suits against nations across the economic spectrum, contesting – like the example of the UK mine – official measures to prevent environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP