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What is your reckon our democratic process functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that was how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, or the oligarchs behind them, are able to litigate against nation states for the policies they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, including companies headquartered in this country. Access is granted solely for corporations based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but compensation the panel members conclude the company might otherwise have made. The state may have to drop the legislation. It is hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms observe each other, and investment funds bankroll lawsuits for a share of a share of the awards. The consequence? National sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices taken by parliaments is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Case: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice determined that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the consent the previous administration had granted. Today, this legal outcome is under threat by an secret arbitration panel answering to only the entities filing the suit.

Last August, a company whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the United States was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. Who is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Challenge

On the same day that the court on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, claiming $16bn: half that government’s yearly budget. Included in the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that such things could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and there has never been a problem in the past.” An expert on this matter accused critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations grasp the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. This year, energy and extraction companies have lodged a historic level of claims against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt climate breakdown. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP