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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 become law. Statutes is upheld by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the regulations they pass, at private courts made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even companies operating from this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal rules that a government measure may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but money the arbitrators determine the company might otherwise have made. The state may have to rescind the measure. It is hesitant to enacting future policies in that area, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies observe each other, and investment funds finance suits for a share of a portion of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions enacted by elected bodies is that this stipulation has been incorporated – without public consent, and often in an atmosphere of profound opacity – within trade treaties.

A Specific Example: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The Labour government later cancelled the permission the previous administration had granted. Now, this victory faces being overturned by an foreign court reporting to only the companies petitioning it.

Last August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the national judiciary supports it, then a international entity challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, seeking $16bn: an amount representing half nation's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

Misleading Claims and Growing Costs

Politicians promised that these scenarios could not occur. Previously, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations grasp the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That prediction has now materialised. Recently, oil and gas and mining firms have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to stop global warming. Firms have so far won $114bn via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP