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How do you understand our democratic process operates? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that’s how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies 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 anticipated profits, it may order compensation of hundreds of millions, even billions.

These awards constitute not actual losses but compensation the tribunal officials conclude the company could potentially have made. The state may have to rescind the measure. It will be deterred from passing future laws in that area, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and investment funds finance suits in exchange for a portion of the settlements. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the decisions enacted by legislatures is that this clause has been incorporated – without public consent, and often in a climate of total confidentiality – within international trade agreements.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the senior court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on climate commitments. The Labour government subsequently revoked the permission the previous administration had granted. Currently, this success could be compromised by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to proceed. The public has no idea how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK enacted against him following the war in Ukraine. He has previously started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this topic accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with general mockery.

That prediction has now materialised. This year, fossil fuel and resource corporations have lodged a historic level of claims against nations rich and poor, challenging – similar to the UK mine – state efforts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP