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Can you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. However, that’s how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Today, international firms, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of vast sums, even billions.

These awards constitute not actual losses but funds the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It is discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being initiated, as companies learn from each other, and investment funds finance suits for a share of a portion of the takings. The consequence? Democratic sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings made by parliaments is that this stipulation has been written – absent public approval, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The judge determined that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government later cancelled the licence the Tories had approved. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the entities bringing the case.

In August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. The public has little idea how much this sum represents. What legal team is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking a colossal sum: half that government’s yearly income. Part of the legal team on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that these events could not occur. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An expert on this matter accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That prediction is now a reality. In the current period, oil and gas and mining firms have initiated a historic level of claims against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP