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What is your understand our democratic process works? Maybe similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, international firms, along with the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held in secret. Unlike our courts, these panels allow no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including businesses operating from this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These awards represent not real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The state might be compelled to abandon its policy. It will be deterred from enacting future policies of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices made by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The justice determined that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the licence the previous administration had approved. Today, this success is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

Last August, a company whose ultimate owners reside in the tax haven initiated proceedings against the UK government. Last week a tribunal in the United States was established to hear it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have no idea how much this could amount to. Who is representing it challenging the state? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company challenges it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case at present, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, seeking $16bn: half that government’s yearly income. Among the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these scenarios were not possible. Previously, a senior politician, championing the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this issue accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a unprecedented number of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP