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What is your understand our democratic process functions? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Well, that’s how it used to work. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, international firms, or the wealthy individuals behind them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open exclusively to entities based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order damages of vast sums, even billions.

This compensation constitute not tangible damages but money the tribunal officials determine the company might otherwise have made. The administration might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and investment funds fund legal actions in return for a cut of the takings. The outcome? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings made by parliaments is that this stipulation has been written – absent public approval, and often in conditions of profound opacity – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the High Court. The presiding officer ruled 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 agreed to the questionable argument that the mine would have had no impact on climate commitments. The Labour government later cancelled the permission the former government had granted. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the companies petitioning it.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. We have little idea how much this might be. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot the MP. The administration passes a law, the domestic court upholds it, then a overseas corporation challenges it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has already started suing Luxembourg with similar intent, demanding a colossal sum: half that government’s yearly income. Among the legal team on his side? a prominent lawyer, married to the previous PM.

Trade specialists contend 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 ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these scenarios could not occur. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An expert on this issue accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the influence they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with general mockery.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have initiated a record number of suits against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to halt global warming. Firms have thus far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP