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How do you reckon our democratic process operates? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, including enterprises headquartered in this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but funds the tribunal officials decide the company could potentially have made. The administration may have to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as companies learn from each other, and hedge funds finance suits in exchange for a portion of the settlements. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings enacted by legislatures is that this provision has been written – without public consent, and often in an atmosphere of total confidentiality – inside trade treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge found that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the consent the previous administration had approved. Currently, this success faces being overturned by an foreign court reporting to only the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. We have little idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a international entity contests it through an undemocratic private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this topic accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies start to realise the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, challenging – similar to the UK mine – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP