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Can you understand our democratic process works? Perhaps something like this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that used to be how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, foreign corporations, and the wealthy individuals that control them, can sue nation states for the laws they pass, at secret arbitration panels made up of business advocates. The cases are conducted in secret. Differing from national judiciaries, these bodies provide no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. Access is granted exclusively to businesses registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These awards constitute not real financial harm but compensation the arbitrators determine the company would perhaps have made. The state might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of legal actions are being brought, as corporations learn from each other, and investment funds finance suits for a share of a portion of the awards. The outcome? Democratic sovereignty and democratic governance are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices enacted by parliaments is that this stipulation has been inserted – absent public approval, and typically amid conditions of profound opacity – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had issued. Now, this victory could be compromised by an secret arbitration panel reporting to exclusively the entities petitioning it.

In August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was established to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state passes a law, the national judiciary supports it, then a international entity contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him after the Russian aggression. He has already filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of state's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Risks

We were assured that such things were not possible. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this issue labelled activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations grasp the power bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, energy and mining firms have filed a record number of suits against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – government attempts to stop global warming. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP