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How do you reckon our democratic process works? Perhaps similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes is upheld by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

In the modern era, international firms, and the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but compensation the panel members conclude the company might otherwise have made. The government may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Process Running Rampant

Record numbers of disputes are being filed, as companies observe each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The consequence? Sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the rulings made by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the senior court. The justice ruled that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the permission the Tories had approved. Now, this success faces being overturned by an secret arbitration panel reporting to only the companies petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was convened to hear it.

The company is suing the UK for the money it would have generated if the mine had received permission to proceed. We have little idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the court on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg for this reason, seeking $16bn: half that nation's yearly income. Part of the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this issue accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies start to realise the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has now materialised. This year, energy and resource corporations have initiated a unprecedented number of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP