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Can you perceive our democratic process functions? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Advent of Secret Arbitration Panels

Today, overseas companies, and the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of business advocates. The cases are conducted in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I cannot take a case to them, just as our government, including businesses operating from this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The administration could be forced to abandon its policy. It is discouraged from enacting future policies in that area, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being initiated, as companies take cues from each other, and investment funds fund legal actions for a share of a share of the takings. The result? National sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices taken by elected bodies is that this provision has been incorporated – absent public approval, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the permission the previous administration had issued. Today, this victory could be compromised by an secret arbitration panel reporting to only the companies bringing the case.

In August, a firm whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. Which individual is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company challenges it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK enacted against him after the war in Ukraine. He has previously started suing another European state with similar intent, claiming sixteen billion dollars: equivalent to half of state's yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these scenarios were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That warning has come to pass. This year, oil and gas and extraction companies have filed a record number of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP