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What is your understand our democratic process operates? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that’s how it used to work. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, and the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted only to corporations operating from foreign soil.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, running into billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company could potentially have made. The administration could be forced to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies observe each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions taken by elected bodies is that this clause has been written – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Real-World Example: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that plans to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the consent the former government had approved. Currently, this legal outcome is under threat by an foreign court answering to no one but the entities bringing the case.

In August, a firm whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in the United States was convened to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. We have no idea how much this sum represents. What legal team is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a foreign company disputes it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: equivalent to half of state's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over elected governments could be blocking the funds Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these events wouldn’t happen. In 2014, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this topic accused activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have filed a historic level of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have thus far won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP