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How do you reckon our democratic process functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, international firms, along with the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are held behind closed doors. Unlike our courts, these panels grant no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted only to entities registered abroad.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards represent not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It becomes hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations observe each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The consequence? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions enacted by legislatures is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the consent the previous administration had issued. Currently, this victory is under threat by an foreign court accountable to no one but the companies filing the suit.

In August, a firm whose final controllers are located in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. Which individual is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the high court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK enacted against him following the Russian aggression. He has previously started suing another European state on these grounds, demanding sixteen billion dollars: half that state's yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in utilising seized state 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 investment pact. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these events wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” An expert on this issue labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning is now a reality. In the current period, energy and extraction companies have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have so far won $114bn through ISDS, of which energy giants have secured the majority. That represents the combined GDP