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What is your reckon our democratic process functions? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. However, that’s how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These sums represent not real financial harm but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being brought, as corporations learn from each other, and private equity finance suits for a share of a share of the takings. The result? Sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions enacted by legislatures is that this clause has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The justice found that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the Tories had issued. Currently, this success is under threat by an offshore tribunal accountable to only the corporations filing the suit.

During August, a firm whose final controllers reside in the tax haven initiated proceedings versus the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no idea how much this could amount to. What legal team is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the tribunal on the mining lawsuit was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation for this reason, claiming a colossal sum: half that nation's yearly income. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that such things wouldn’t happen. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms start to realise the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and resource corporations have initiated a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP