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What is your reckon our democratic process operates? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law is upheld by the courts. End of story. Yet, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, or the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted solely for businesses based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums constitute not tangible damages but compensation the tribunal officials decide the company would perhaps have made. The state could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being initiated, as corporations learn from each other, and private equity fund legal actions in exchange for a portion of the awards. The consequence? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the decisions enacted by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer found that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the consent the Tories had issued. Now, this legal outcome is under threat by an foreign court answering to only the companies filing the suit.

Last August, a firm whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. Last week a tribunal in the United States was established to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been permitted to proceed. The public has little idea how much this sum represents. Which individual is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a international entity challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case at present, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him following the war in Ukraine. He has started suing Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Risks

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “as corporations begin to understand the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Corporations have so far won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP