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How do you perceive our democratic process operates? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Today, overseas companies, along with the wealthy individuals who own them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. You or I cannot take a case to them, just as our government, including companies headquartered in this country. The door is open only to businesses based overseas.

If a tribunal determines that a legislative action could harm the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These awards constitute not tangible damages but compensation the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds fund legal actions in return for a share of the takings. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions made by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice ruled that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the consent the previous administration had approved. Currently, this victory is under threat by an secret arbitration panel answering to only the entities bringing the case.

In August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. The public has little idea how much this might be. Who is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a foreign company contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it appears probable that he will utilise the arbitration process to contest the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, claiming $16bn: equivalent to half of nation's yearly income. Included in the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Threats

The public was told that these scenarios were not possible. Previously, a government leader, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this matter accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states needed to fear these lawsuits. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning is now a reality. This year, fossil fuel and extraction companies have filed a record number of cases against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – government attempts to halt global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained the majority. That represents the combined GDP