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What is your perceive our democratic process operates? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Emergence of Secret Arbitration Panels

Today, international firms, along with the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals staffed by business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including businesses operating from this country. Access is granted solely for businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation are based not on real financial harm but funds the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It becomes discouraged from passing future laws of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being initiated, as companies learn from each other, and hedge funds finance suits for a share of a share of the takings. The result? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions made by legislatures is that this clause has been inserted – without public consent, and typically amid a climate of profound opacity – within trade treaties.

A Specific Instance: The UK Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The Labour government then withdrew the consent the Tories had issued. Now, this success could be compromised by an secret arbitration panel reporting to exclusively the entities petitioning it.

In August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to proceed. We have little idea how much this sum represents. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a foreign company challenges it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK imposed on him after the war in Ukraine. He has already filed a claim against a small nation on these grounds, seeking sixteen billion dollars: half that state's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that such things could not occur. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this topic described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms start to realise the influence they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That warning has come to pass. This year, energy and resource corporations have lodged a historic level of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP