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What is your understand our democratic process works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that used to be how it once functioned. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, and the oligarchs who own them, can sue elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals 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 companies based in this country. They are open exclusively to corporations registered abroad.

When a secret court finds that a government measure may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company could potentially have made. The state could be forced to abandon its policy. It is discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as corporations observe each other, and private equity finance suits for a share of a share of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices made by parliaments is that this provision has been written – without public consent, and often in conditions of extreme secrecy – inside trade treaties.

A Concrete Instance: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge determined that proposals to excavate the first new deep coal mine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government later cancelled the licence the previous administration had issued. Now, this victory is under threat by an secret arbitration panel accountable to only the entities petitioning it.

Last August, a corporate entity whose final controllers reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. Citizens have little idea how much this could amount to. Which individual is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the domestic court validates it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK imposed on him following the Russian aggression. He has already initiated proceedings against a small nation for this reason, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in leveraging immobilised state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Costs

The public was told that these scenarios were not possible. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this matter accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about such legal actions. Warnings that “as corporations grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. Recently, energy and extraction companies have lodged a record number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Companies have so far won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP