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How do you reckon our democratic process works? Maybe something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that used to be how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

Today, foreign corporations, or the billionaires who own them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These awards constitute not actual losses but money the arbitrators decide the company would perhaps have made. The administration could be forced to abandon its policy. It will be hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of legal actions are being filed, as firms learn from each other, and private equity finance suits for a share of a portion of the awards. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the choices taken by elected bodies is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of total confidentiality – into international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have no impact on climate commitments. The Labour government then withdrew the consent the former government had issued. Now, this success is under threat by an secret arbitration panel accountable to exclusively the corporations bringing the case.

Last August, a company whose final controllers reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was set up to hear it.

This firm is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the domestic court supports it, then a overseas corporation challenges it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him following the war in Ukraine. He has previously filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: half that nation's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that such things were not possible. In 2014, a government leader, championing the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to halt global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP