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What is your reckon our democratic process functions? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

Today, overseas companies, or the billionaires that control them, have the power to sue governments for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open only to entities operating from foreign soil.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These sums represent not actual losses but money the arbitrators determine the company might otherwise have made. The government could be forced to abandon its policy. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Growing Exponentially

Historically high figures of disputes are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a share of the settlements. The consequence? Sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings made by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Concrete Case: The UK Coal Mine

Last year, environmental campaigners secured a significant win at the High Court. The judge determined that plans to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the previous administration had approved. Now, this victory faces being overturned by an secret arbitration panel answering to no one but the companies filing the suit.

In August, a firm whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. What legal team is representing it challenging the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the high court upholds it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him following the invasion of Ukraine. He has started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Part of the legal team representing him there? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that such things were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “when companies start to realise the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with scepticism.

That warning has now materialised. Recently, oil and gas and resource corporations have lodged a record number of cases against nations rich and poor, opposing – as in the case of the UK mine – government attempts to halt global warming. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP