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What is your understand our democratic process functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Nowadays, overseas companies, and the oligarchs behind them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses operating from this country. They are open exclusively to corporations based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration may have to drop the legislation. It becomes hesitant to enacting future policies along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of disputes are being initiated, as firms take cues from each other, and private equity finance suits for a share of a portion of the takings. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the rulings enacted by parliaments is that this provision has been written – without democratic mandate, and typically amid conditions of extreme secrecy – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice determined that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The new government then withdrew the consent the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel accountable to only the corporations filing the suit.

Last August, a corporate entity whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The claimant is suing the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no clear indication how much this could amount to. What legal team is representing it in opposition to the British government? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The state passes a law, the domestic court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: half that nation's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these events were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this topic accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were met with scepticism.

That prediction is now a reality. This year, energy and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to halt climate breakdown. Companies have to date won vast sums through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP