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Can you understand our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that was how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Today, overseas companies, or the oligarchs who own them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels grant no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies operating from this country. The door is open solely for businesses operating from foreign soil.

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

This compensation represent not actual losses but compensation the arbitrators conclude the company could potentially have made. The government might be compelled to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the awards. The result? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings enacted by elected bodies is that this provision has been incorporated – absent public approval, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge ruled that plans to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the licence the Tories had granted. Currently, this victory faces being overturned by an offshore tribunal answering to exclusively the companies filing the suit.

During August, a company whose beneficial owners are located in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has little idea how much this sum represents. What legal team is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK levied against him after the Russian aggression. He has already started suing Luxembourg for this reason, claiming $16bn: an amount representing half nation's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this topic accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. This year, oil and gas and resource corporations have lodged a record number of claims against nations rich and poor, opposing – similar to the UK mine – official measures to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP