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How do you reckon our democratic process works? It could be something like this. The public votes for 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. However, that was how it once functioned. Those days are over.

The Advent of Secret Tribunals

Today, international firms, or the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes take place in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open only to businesses registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums constitute not real financial harm but money the arbitrators determine the company could potentially have made. The administration might be compelled to rescind the measure. It becomes hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being initiated, as firms observe each other, and private equity fund legal actions in exchange for a portion of the awards. The consequence? Sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings enacted by parliaments is that this provision has been inserted – without public consent, and typically amid a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The justice ruled that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The Labour government later cancelled the consent the previous administration had issued. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the entities filing the suit.

In August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him after the Russian aggression. He has already started suing a small nation with similar intent, claiming sixteen billion dollars: half that government’s yearly budget. Among the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this issue accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That prediction is now a reality. In the current period, energy and mining firms have lodged a historic level of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP