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What is your perceive our democratic process functions? Maybe something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, international firms, along with the wealthy individuals behind them, can sue nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for businesses operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, running into billions.

This compensation represent not actual losses but compensation the panel members conclude the company would perhaps have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as firms observe each other, and hedge funds finance suits in return for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by elected bodies is that this provision has been incorporated – without public consent, and often in conditions of profound opacity – into bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the senior court. The judge determined that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the consent the former government had issued. Currently, this victory faces being overturned by an offshore tribunal answering to only the entities petitioning it.

In August, a company whose final controllers are based in the tax haven initiated proceedings versus the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

This firm is suing the UK for the profits it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the arbitration process to fight the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Among the lawyers representing him there? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios could not occur. Previously, a senior politician, promoting the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to prevent climate breakdown. Companies have so far won vast sums through ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP