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What is your reckon our democratic process functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

Today, overseas companies, along with the wealthy individuals who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held in secret. Unlike our courts, these tribunals grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises operating from this country. Access is granted exclusively to businesses operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation constitute not tangible damages but money the panel members determine the company might otherwise have made. The administration may have to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being initiated, as firms take cues from each other, and investment funds finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices enacted by elected bodies is that this clause has been written – without public consent, and frequently under a climate of extreme secrecy – inside trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The new government later cancelled the licence the previous administration had granted. Currently, this legal outcome faces being overturned by an offshore tribunal answering to only the entities petitioning it.

Last August, a firm whose final controllers are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. What legal team is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it appears probable that he’ll use the arbitration process to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has started suing another European state with similar intent, demanding a colossal sum: half that state's annual revenue. Included in the counsel acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that such things could not occur. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this topic labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies start to realise the influence bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and extraction companies have initiated a record number of suits against nations rich and poor, challenging – like the example of the UK mine – government attempts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP