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How do you understand our democratic process operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, or the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to entities operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These awards are based not on actual losses but compensation the tribunal officials determine the company could potentially have made. The administration might be compelled to drop the legislation. It is deterred from enacting future policies along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and investment funds finance suits in exchange for a cut of the settlements. The result? National sovereignty and democratic governance are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings enacted by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – within trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer found that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government then withdrew the consent the Tories had granted. Today, this success faces being overturned by an offshore tribunal answering to no one but the companies petitioning it.

In August, a firm whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is representing it challenging the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That warning has now materialised. In the current period, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – similar to the UK mine – official measures to halt global warming. Corporations have thus far won $114bn via ISDS, of which oil majors have secured $84bn. That represents the combined GDP