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Can you understand our democratic process operates? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs who own them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises operating from this country. The door is open only to entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These awards are based not on real financial harm but funds the tribunal officials conclude the company would perhaps have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A System Spiralling Out of Control

Record numbers of cases are being filed, as companies learn from each other, and investment funds fund legal actions for a share of a portion of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by legislatures is that this provision has been written – without public consent, and typically amid conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer found that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The new government later cancelled the licence the previous administration had issued. Now, this victory is under threat by an foreign court reporting to only the entities bringing the case.

In August, a company whose final controllers are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The company is seeking compensation from 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 might be. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has started suing a small nation on these grounds, claiming sixteen billion dollars: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these scenarios were not possible. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An expert on this matter accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That warning is now a reality. This year, energy and resource corporations have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to halt environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP