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How do you understand our democratic process works? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. End of story. However, that was how it once functioned. Not anymore.

The Advent of Secret Tribunals

In the modern era, foreign corporations, and the wealthy individuals who own them, can sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these panels allow no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open solely for corporations based overseas.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, potentially billions.

This compensation are based not on real financial harm but money the tribunal officials determine the company would perhaps have made. The state might be compelled to rescind the measure. It becomes hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being filed, as corporations take cues from each other, and hedge funds fund legal actions for a share of a share of the awards. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices made by parliaments is that this stipulation has been written – without public consent, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge ruled that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the Tories had approved. Currently, this success could be compromised by an offshore tribunal answering to no one but the entities petitioning it.

During August, a company whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was established to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has no idea how much this sum represents. Who is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal 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, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Among the legal team representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

Politicians promised that such things could not occur. Years ago, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An expert on this topic labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction is now a reality. Recently, fossil fuel and mining firms have lodged a record number of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP