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What is your perceive our democratic process operates? It could be something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

Today, international firms, along with the oligarchs who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

These awards constitute not tangible damages but funds the panel members determine the company could potentially have made. The administration could be forced to abandon its policy. It will be deterred from enacting future policies along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn 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 prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions taken by parliaments is that this provision has been written – absent public approval, and frequently under conditions of extreme secrecy – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

A year ago, activists won a great victory at the senior court. The justice determined that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the licence the Tories had granted. Today, this victory could be compromised by an offshore tribunal answering to only the entities bringing the case.

During August, a company whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government enacts a policy, the high court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, seeking $16bn: equivalent to half of state's yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that these events were not possible. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “once firms grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That prediction is now a reality. In the current period, oil and gas and extraction companies have filed a record number of claims against nations rich and poor, opposing – like the example of the UK mine – official measures to stop climate breakdown. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP