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What is your reckon our democratic process works? It could be similar to this. We elect MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Advent of Secret Tribunals

Today, overseas companies, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even businesses based in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums are based not on tangible damages but funds the panel members determine the company would perhaps have made. The government may have to abandon its policy. It is hesitant to enacting future policies along the same lines, for fear of facing litigation.

A System Running Rampant

Historically high figures of disputes are being initiated, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the awards. The result? Sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings made by parliaments is that this clause has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that plans to open the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on climate commitments. The new government subsequently revoked the consent the Tories had approved. Currently, this success faces being overturned by an secret arbitration panel answering to no one but the companies filing the suit.

Last August, a company whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a tribunal in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel against the British government? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, demanding $16bn: half that government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed investment treaty upon trade deal and there has never been a problem in the past.” A consultant on this issue labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were met with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – official measures to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP