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Can you perceive our democratic process operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, or the wealthy individuals that control them, have the power to sue governments for the laws they pass, at private courts made up of commercial attorneys. The cases take place in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. They are open only to corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but compensation the arbitrators conclude the company could potentially have made. The government could be forced to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as firms take cues from each other, and private equity fund legal actions in return for a share of the takings. The result? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices made by legislatures is that this provision has been inserted – without public consent, and typically amid a climate of extreme secrecy – into trade treaties.

A Specific Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel answering to no one but the corporations filing the suit.

In August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was convened to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. What legal team is representing it challenging the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court validates it, then a international entity contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK levied against him following the Russian aggression. He has previously started suing a small nation with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly budget. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen state funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

The public was told that these events were not possible. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.

That threat has now materialised. In the current period, oil and gas and extraction companies have filed a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have to date won $114bn through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP