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What is your reckon our democratic process functions? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Arbitration Panels

Today, international firms, or the oligarchs who own them, can sue governments for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted only to entities registered abroad.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

This compensation constitute not actual losses but compensation the panel members determine the company could potentially have made. The state might be compelled to rescind the measure. It will be discouraged from passing future laws along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as companies take cues from each other, and private equity bankroll lawsuits for a share of a portion of the takings. The outcome? Sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices taken by legislatures is that this clause has been written – absent public approval, and typically amid a climate of total confidentiality – within trade treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had no impact on climate commitments. The incoming administration then withdrew the consent the Tories had approved. Today, this victory is under threat by an foreign court accountable to exclusively the corporations filing the suit.

During August, a company whose final controllers are located in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. We have no idea how much this could amount to. Which individual is representing it challenging the state? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The administration passes a law, the domestic court supports it, then a international entity contests it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK levied against him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, demanding $16bn: equivalent to half of nation's annual revenue. Included in the counsel on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that these scenarios could not occur. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That warning has come to pass. This year, oil and gas and extraction companies have filed a historic level of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP