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What is your understand our democratic process works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, international firms, along with the wealthy individuals that control them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted only to businesses based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but compensation the tribunal officials decide the company would perhaps have made. The administration may have to rescind the measure. It will be discouraged from passing future laws along the same lines, worried about facing litigation.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as corporations take cues from each other, and private equity finance suits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings made by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government later cancelled the permission the Tories had granted. Currently, this success is under threat by an foreign court answering to only the companies filing the suit.

In August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Which individual is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK levied against him after the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the lawyers representing him there? Cherie Blair, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these events were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms grasp the power they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. In the current period, oil and gas and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to prevent climate breakdown. Firms have to date won vast sums through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP