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Can you reckon our democratic process works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even companies based in this country. Access is granted exclusively to corporations based overseas.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

These sums are based not on real financial harm but funds the tribunal officials decide the company would perhaps have made. The administration could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being brought, as companies take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The consequence? Sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices taken by elected bodies is that this stipulation has been written – without public consent, and frequently under a climate of total confidentiality – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the permission the previous administration had approved. Now, this success faces being overturned by an offshore tribunal reporting to no one but the companies filing the suit.

During August, a firm whose final controllers are based in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to go ahead. We have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has already initiated proceedings against another European state on these grounds, demanding a colossal sum: equivalent to half of state's annual revenue. Included in the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this matter described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations grasp the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, opposing – similar to the UK mine – official measures to stop global warming. Companies have to date won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP