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Can you perceive our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Well, that’s how it used to work. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, along with the oligarchs who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even businesses based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but funds the tribunal officials determine the company would perhaps have made. The government could be forced to abandon its policy. It will be hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as companies learn from each other, and hedge funds finance suits in exchange for a portion of the settlements. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions taken by legislatures is that this provision has been inserted – without public consent, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, a conservation group secured a significant win at the high court. The presiding officer determined that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government then withdrew the consent the previous administration had approved. Currently, this success could be compromised by an secret arbitration panel answering to exclusively the companies bringing the case.

Last August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a tribunal in the US capital was convened to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it appears probable that he may employ the arbitration process to contest the restrictions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: half that government’s yearly income. Included in the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that these events could not occur. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this issue labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. This year, oil and gas and resource corporations have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP