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Can you perceive our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Rise of Secret Tribunals

Nowadays, international firms, along with the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. The door is open only to corporations based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but money the arbitrators decide the company might otherwise have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies in that area, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of disputes are being filed, as companies observe each other, and hedge funds finance suits in return for a share of the takings. The consequence? National sovereignty and democratic governance are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices made by elected bodies is that this stipulation has been inserted – without public consent, and frequently under a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice found that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the previous administration had granted. Currently, this success is under threat by an offshore tribunal reporting to exclusively the companies petitioning it.

In August, a company whose beneficial owners are located in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the money it would have generated if the mine had been allowed to go ahead. We have no idea how much this might be. Who is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Case

On the same day that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case to date, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK enacted against him after the Russian aggression. He has started suing Luxembourg with similar intent, seeking a colossal sum: half that nation's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that these scenarios could not occur. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic labelled activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. This year, energy and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP