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What is your perceive our democratic process functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, along with the billionaires behind them, are able to litigate against nation states for the policies they pass, at private courts composed of business advocates. Such disputes are held in secret. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but compensation the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It will be discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as companies observe each other, and investment funds finance suits in exchange for a cut of the settlements. The outcome? Sovereignty and democratic governance are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions made by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of total confidentiality – inside trade treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The new government subsequently revoked the permission the former government had granted. Currently, this victory is under threat by an foreign court reporting to exclusively the companies petitioning it.

In August, a firm whose final controllers reside in the offshore financial centre lodged a claim challenging the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The state enacts a policy, the high court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the court on the coal mine dispute was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, claiming $16bn: half that state's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Threats

The public was told that such things were not possible. Years ago, a government leader, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this matter accused campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. Recently, energy and extraction companies have filed a unprecedented number of suits against nations rich and poor, opposing – similar to the UK mine – official measures to halt global warming. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP