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Can you understand our democratic process operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, and the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted solely for entities based overseas.

When a secret court rules that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation represent not tangible damages but money the arbitrators conclude the company would perhaps have made. The government could be forced to rescind the measure. It will be hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of disputes are being brought, as firms observe each other, and investment funds finance suits for a share of a share of the awards. The result? National sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the licence the former government had granted. Now, this success could be compromised by an foreign court accountable to exclusively the entities filing the suit.

During August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim challenging the UK government. Recently a tribunal in the United States was convened to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this might be. Which individual is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The state passes a law, the domestic court supports it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it seems likely that he may employ the tribunal to contest the penalties the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: half that government’s yearly income. Included in the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “as corporations start to realise the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by widespread derision.

That threat has now materialised. This year, fossil fuel and mining firms have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to prevent global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP