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Can you reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that was how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s projected profits, it may order damages of vast sums, potentially billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as corporations observe each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions taken by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that schemes to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The new government then withdrew the permission the former government had issued. Today, this legal outcome is under threat by an offshore tribunal reporting to no one but the entities petitioning it.

Last August, a company whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. The public has little idea how much this might be. Which individual is serving as its counsel against the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The administration passes a law, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK levied against him following the Russian aggression. He has previously initiated proceedings against a small nation for this reason, claiming $16bn: equivalent to half of government’s yearly income. Part of the counsel on his side? a prominent lawyer, married to the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that such things could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this topic described critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were met with general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have lodged a record number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP