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What is your perceive our democratic process operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it used to work. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels composed of business advocates. The cases take place in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open exclusively to entities operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s expected profits, it can award compensation of vast sums, even billions.

These awards are based not on tangible damages but money the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It will be discouraged from enacting future policies of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds fund legal actions in exchange for a share of the takings. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer found that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the former government had granted. Today, this success is under threat by an offshore tribunal reporting to no one but the corporations filing the suit.

During August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the US capital was established to hear it.

The company is suing the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against another European state on these grounds, seeking $16bn: equivalent to half of nation's yearly income. Part of the lawyers representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these scenarios could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” A consultant on this issue described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “when companies grasp the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That threat has come to pass. This year, energy and resource corporations have filed a record number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – government attempts to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP