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How do you perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Rise of Secret Tribunals

In the modern era, overseas companies, and the oligarchs who own them, have the power to sue nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for entities registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These awards constitute not tangible damages but money the panel members conclude the company might otherwise have made. The state may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as firms learn from each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions enacted by elected bodies is that this clause has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge found that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had granted. Today, this success faces being overturned by an foreign court accountable to exclusively the corporations filing the suit.

Last August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The administration passes a law, the high court upholds it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it appears probable that he may employ the tribunal to fight the penalties the UK levied against him after the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, seeking a colossal sum: equivalent to half of nation's yearly budget. Among the lawyers on his side? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these events could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this topic described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That threat is now a reality. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to halt climate breakdown. Companies have so far won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP