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What is your understand our democratic process operates? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals behind them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it may order damages of hundreds of millions, potentially billions.

This compensation represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The government may have to drop the legislation. It will be deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as firms take cues from each other, and hedge funds fund legal actions for a share of a cut of the takings. The result? Democratic sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions made by elected bodies is that this clause has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, environmental campaigners secured a significant win at the high court. The judge determined that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration then withdrew the licence the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal reporting to no one but the entities filing the suit.

Last 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 the US capital was set up to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. We have no idea how much this could amount to. Which individual is acting on its behalf challenging the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the national judiciary supports it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he may employ the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has started suing a small nation on these grounds, seeking sixteen billion dollars: an amount representing half state's yearly income. Included in the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that such things were not possible. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and mining firms have initiated a historic level of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP