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Can you perceive our democratic process functions? It could be similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, or the oligarchs 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. Unlike our courts, these panels grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including companies headquartered in this country. They are open solely for corporations registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

This compensation constitute not real financial harm but funds the arbitrators decide the company could potentially have made. The government might be compelled to drop the legislation. It will be hesitant to enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being brought, as firms take cues from each other, and private equity finance suits in exchange for a share of the settlements. The result? Democratic sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions enacted by legislatures is that this clause has been written – without public consent, and typically amid conditions of total confidentiality – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that schemes to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government then withdrew the consent the former government had approved. Today, this success could be compromised by an secret arbitration panel reporting to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this might be. Who is serving as its counsel in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against another European state for this reason, seeking $16bn: equivalent to half of state's yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Risks

The public was told that such things were not possible. Previously, a former prime minister, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this matter labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That threat has come to pass. This year, oil and gas and mining firms have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the UK mine – official measures to stop global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP