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How do you perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Well, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, overseas companies, and the oligarchs behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even companies operating from this country. They are open solely for entities operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

These awards are based not on actual losses but funds the arbitrators decide the company could potentially have made. The government may have to drop the legislation. It is hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and hedge funds finance suits in exchange for a cut of the awards. The result? National sovereignty and popular rule are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge determined that proposals to open the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the entities filing the suit.

During August, a firm whose final controllers reside in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Which individual is acting on its behalf against the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, claiming $16bn: half that state's yearly income. Included in the legal team on his side? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that such things wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this matter labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms start to realise the influence they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by general mockery.

That threat is now a reality. This year, oil and gas and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Corporations have to date won $114bn via ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP