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What is your perceive our democratic process functions? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Rise of Shadow Arbitration Panels

Today, overseas companies, or the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at private courts composed of business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises operating from this country. Access is granted exclusively to corporations based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These awards constitute not tangible damages but compensation the tribunal officials determine the company would perhaps have made. The government might be compelled to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as corporations take cues from each other, and hedge funds fund legal actions in return for a share of the settlements. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions enacted by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of profound opacity – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

A year ago, activists won a great victory at the high court. The justice determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The Labour government later cancelled the permission the Tories had issued. Now, this victory could be compromised by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the profits it might have made if the mine had been permitted to go ahead. We have no clear indication how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a international entity challenges it through an secretive private court, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it appears probable that he’ll use the tribunal to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of state's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction is now a reality. Recently, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP