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What is your perceive our democratic process works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires that control them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases are held behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to entities based overseas.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not actual losses but funds the arbitrators conclude the company could potentially have made. The administration may have to rescind the measure. It will be discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a share of the takings. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this success is under threat by an foreign court reporting to no one but the companies bringing the case.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was established to consider the case.

This firm is suing the UK for the money it might have made if the mine had been permitted to go ahead. We have no idea how much this might be. What legal team is representing it in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has already started suing another European state on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that such things wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this issue labelled critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That threat has now materialised. This year, oil and gas and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – similar to the UK mine – official measures to stop global warming. Companies have thus far won vast sums by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP