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How do you understand our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Well, that was how it used to work. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. They are open solely for businesses registered abroad.

If a tribunal finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the arbitrators conclude the company would perhaps have made. The administration could be forced to drop the legislation. It is deterred from passing future laws in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings made by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations petitioning it.

Last August, a firm whose final controllers are based in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Who is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a foreign company challenges it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has filed a claim against another European state on these grounds, claiming a colossal sum: equivalent to half of state's yearly income. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

The public was told that such things were not possible. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a case in the past.” An expert on this issue labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. This year, energy and mining firms have initiated a historic level of claims against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP