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Can you understand our democratic process functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Emergence of Secret Arbitration Panels

Today, international firms, or the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are conducted in secret. Unlike our courts, these tribunals allow no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. They are open solely for businesses registered abroad.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, even billions.

These sums represent not actual losses but funds the arbitrators conclude the company might otherwise have made. The state might be compelled to drop the legislation. It is discouraged from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The consequence? National sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the rulings taken by legislatures is that this clause has been inserted – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Specific Instance: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the entities petitioning it.

Last August, a corporate entity whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against another European state for this reason, seeking a colossal sum: half that state's annual revenue. Among the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these scenarios could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by widespread derision.

That threat has now materialised. This year, fossil fuel and mining firms have filed a record number of cases against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP