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What is your reckon our democratic process operates? Maybe similar to this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. However, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

Today, international firms, along with the wealthy individuals behind them, have the power to sue governments 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 opportunity to appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even companies based in this country. They are open exclusively to entities operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of vast sums, running into billions.

These sums constitute not actual losses but compensation the panel members decide the company could potentially have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being initiated, as companies learn from each other, and private equity finance suits for a share of a portion of the settlements. The consequence? Sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices taken by elected bodies is that this provision has been inserted – without public consent, and often in a climate of extreme secrecy – within trade treaties.

A Concrete Example: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice found that plans to open the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The new government then withdrew the licence the former government had granted. Today, this success is under threat by an offshore tribunal reporting to exclusively the companies filing the suit.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him after the war in Ukraine. He has started suing a small nation with similar intent, demanding $16bn: half that nation's yearly budget. Among the lawyers on his side? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these scenarios could not occur. Previously, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and there has never been a case in the past.” A consultant on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies grasp the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by widespread derision.

That threat has come to pass. This year, fossil fuel and extraction companies have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to prevent global warming. Companies have to date won $114bn via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP