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What is your perceive our democratic process operates? Maybe something like this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that’s how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, along with the billionaires that control them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. You or I are unable to file a case to them, nor can our government, including companies headquartered in this country. They are open only to corporations based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but money the tribunal officials determine the company might otherwise have made. The state may have to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as firms learn from each other, and investment funds fund legal actions in return for a share of the takings. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions made by legislatures is that this stipulation has been incorporated – without public consent, and typically amid conditions of total confidentiality – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The justice found that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on our carbon budgets. The new government subsequently revoked the consent the previous administration had approved. Now, this success faces being overturned by an offshore tribunal reporting to only the corporations petitioning it.

In August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. We have little idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he will utilise the arbitration process to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against another European state on these grounds, claiming a colossal sum: an amount representing half government’s yearly income. Included in the legal team representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts believe that the EU’s delay in utilising seized state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these events wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies grasp the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has come to pass. Recently, energy and resource corporations have lodged a historic level of claims against nations rich and poor, contesting – like the example of the UK mine – government attempts to prevent climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have been awarded the majority. That represents the combined GDP