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How do you reckon our democratic process works? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, including companies based in this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, even billions.

These awards are based not on real financial harm but compensation the panel members decide the company would perhaps have made. The state might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and private equity finance suits in return for a portion of the settlements. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, activists secured a significant win at the high court. The justice ruled that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Now, this victory is under threat by an secret arbitration panel reporting to exclusively the companies filing the suit.

Last August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. We have no clear indication how much this could amount to. What legal team is serving as its counsel against the state? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it appears probable that he may employ the tribunal to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against another European state for this reason, claiming a colossal sum: an amount representing half state's annual revenue. Among the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this issue described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by ISDS claims. Predictions that “as corporations start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That threat has now materialised. This year, energy and mining firms have filed a record number of claims against nations rich and poor, contesting – as in the case of the UK mine – official measures to prevent environmental catastrophe. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP