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What is your reckon our democratic process operates? Maybe something like this. We elect MPs. They vote on bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Rise of Offshore Arbitration Panels

Today, international firms, or the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at private courts made up of business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, including companies based in this country. Access is granted only to entities based overseas.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These awards represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as companies observe each other, and hedge funds finance suits in exchange for a cut of the settlements. The result? National sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the choices taken by legislatures is that this provision has been inserted – absent public approval, and often in an atmosphere of total confidentiality – inside trade treaties.

A Concrete Case: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer found that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the permission the former government had granted. Currently, this victory faces being overturned by an secret arbitration panel accountable to no one but the corporations bringing the case.

Last August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers on his side? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that these events could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this issue labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies grasp the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Companies have so far won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP