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Can you reckon our democratic process functions? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that’s how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Nowadays, international firms, and the wealthy individuals behind them, can sue governments for the laws they pass, at private courts composed of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, or even enterprises headquartered in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but money the arbitrators determine the company could potentially have made. The state might be compelled to abandon its policy. It becomes hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of cases are being initiated, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Instance: The Whitehaven Coalmine

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 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the permission the former government had granted. Now, this legal outcome could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

Last August, a firm whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in the United States was established to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Which individual is representing it in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the court on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation on these grounds, seeking $16bn: half that government’s annual revenue. Among the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

We were assured that these events could not occur. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That threat has come to pass. Recently, oil and gas and mining firms have lodged a record number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to stop global warming. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP