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How do you understand our democratic process works? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. However, that was how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals who own them, have the power to sue governments for the regulations they pass, at offshore tribunals composed of business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. Access is granted solely for entities based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but funds the panel members decide the company might otherwise have made. The government may have to drop the legislation. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Running Rampant

Record numbers of cases are being filed, as corporations take cues from each other, and private equity fund legal actions for a share of a share of the takings. The result? Sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions taken by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of profound opacity – into international trade agreements.

A Concrete Instance: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice found that plans to dig the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The Labour government subsequently revoked the consent the former government had issued. Currently, this success could be compromised by an foreign court reporting to no one but the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is representing it in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a overseas corporation disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a government response that the UK is subject to further litigation 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 arbitration process to contest the sanctions the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts contend that the EU’s delay in utilising seized state funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these events could not occur. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Warnings that “when companies grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat has now materialised. This year, energy and mining firms have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Corporations have thus far won $114bn through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP