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What is your understand our democratic process operates? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, overseas companies, and the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals made up of business advocates. The cases are held behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but compensation the tribunal officials decide the company could potentially have made. The government might be compelled to abandon its policy. It will be deterred from passing future laws along the same lines, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The consequence? National sovereignty and democracy are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings enacted by elected bodies is that this provision has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – within trade treaties.

A Real-World Instance: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer found that plans to open the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The new government subsequently revoked the permission the previous administration had approved. Now, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the United States was convened to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The state enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Case

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him after the invasion of Ukraine. He has already filed a claim against another European state with similar intent, claiming a colossal sum: an amount representing half government’s yearly income. Part of the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

We were assured that these scenarios could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has never been a case in the past.” A consultant on this matter accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Predictions that “once firms grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That threat has now materialised. Recently, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP