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How do you reckon our democratic process operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses operating from this country. Access is granted exclusively to corporations based overseas.

When a secret court rules that a law or policy might diminish the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These sums are based not on real financial harm but compensation the tribunal officials determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as companies learn from each other, and hedge funds finance suits for a share of a portion of the settlements. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices enacted by parliaments is that this stipulation has been written – absent public approval, and often in an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The new government then withdrew the licence the former government had issued. Now, this victory faces being overturned by an foreign court reporting to exclusively the entities bringing the case.

Last August, a company whose final controllers are based in the tax haven filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the domestic court validates it, then a international entity challenges it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking $16bn: equivalent to half of government’s annual revenue. Part of the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this issue described critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations grasp the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to halt environmental catastrophe. Firms have so far won $114bn by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP