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Can you perceive our democratic process functions? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, along with the oligarchs that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open solely for entities based overseas.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The administration could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being filed, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on national carbon targets. The new government then withdrew the licence the former government had granted. Currently, this success faces being overturned by an offshore tribunal answering to exclusively the entities filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Recently a arbitration panel in the United States was established to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is acting on its behalf against the British government? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the penalties the UK levied against him subsequent to the Russian aggression. He has previously started suing another European state on these grounds, seeking a colossal sum: equivalent to half of state's annual revenue. Included in the lawyers on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

The public was told that these events wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. This year, oil and gas and extraction companies have lodged a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to prevent environmental catastrophe. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP