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How do you understand our democratic process functions? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, have the power to sue elected administrations for the policies they pass, at private courts staffed by business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. They are open solely for entities based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums represent not actual losses but money the tribunal officials determine the company would perhaps have made. The government might be compelled to abandon its policy. It is discouraged from enacting future policies in that area, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms learn from each other, and private equity finance suits in return for a share of the awards. The outcome? Sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices enacted by parliaments is that this stipulation has been written – without public consent, and typically amid conditions of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the licence the Tories had granted. Today, this legal outcome is under threat by an secret arbitration panel answering to exclusively the entities bringing the case.

In August, a firm whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Recently a tribunal in Washington DC was established to consider the case.

The company is suing the UK for the profits it might have made if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is representing it in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him following the war in Ukraine. He has already started suing another European state on these grounds, seeking a colossal sum: an amount representing half nation's yearly income. Part of the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts contend that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that such things were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this topic described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That threat is now a reality. Recently, energy and resource corporations have initiated a record number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP