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Can you perceive our democratic process functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. Yet, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, or the oligarchs who own them, are able to litigate against governments for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, including companies headquartered in this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These sums are based not on tangible damages but funds the arbitrators decide the company could potentially have made. The state could be forced to rescind the measure. It will be hesitant to passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of cases are being brought, as companies take cues from each other, and hedge funds finance suits for a share of a cut of the awards. The outcome? National sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings enacted by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, activists secured a significant win at the High Court. The justice determined that plans to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The new government later cancelled the consent the previous administration had issued. Today, this success faces being overturned by an offshore tribunal reporting to only the companies petitioning it.

During August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the United States was established to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. We have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him after the invasion of Ukraine. He has started suing another European state on these grounds, claiming $16bn: equivalent to half of state's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in utilising seized state funds as security for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed trade deal after trade deal and there has never been a case in the past.” A consultant on this issue labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies start to realise the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That warning has come to pass. In the current period, energy and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured $84bn. That equates to the combined GDP