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What is your perceive our democratic process operates? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Emergence of Shadow Arbitration Panels

Today, overseas companies, and the oligarchs behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of business advocates. The cases take place behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open only to entities registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it can award damages of vast sums, potentially billions.

These sums are based not on tangible damages but funds the arbitrators decide the company would perhaps have made. The state may have to rescind the measure. It becomes discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies take cues from each other, and private equity finance suits in return for a cut of the takings. The outcome? Sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions taken by elected bodies is that this provision has been inserted – absent public approval, and typically amid conditions of extreme secrecy – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that plans to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the licence the former government had granted. Currently, this success is under threat by an secret arbitration panel reporting to only the companies petitioning it.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim versus the UK government. Last week a tribunal in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this might be. Who is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already started suing another European state on these grounds, claiming sixteen billion dollars: an amount representing half state's yearly income. Among the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that these events wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this matter labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies start to realise the power they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has come to pass. This year, energy and resource corporations have lodged a historic level of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have thus far won $114bn via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP