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Can you reckon our democratic process functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, or the oligarchs who own them, can sue governments for the regulations they pass, at private courts staffed by business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including enterprises based in this country. They are open solely for corporations operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but money the arbitrators decide the company could potentially have made. The state may have to abandon its policy. It will be hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings made by legislatures is that this clause has been inserted – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists secured a significant win at the senior court. The judge determined that schemes to open the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have zero effect on national carbon targets. The Labour government then withdrew the consent the previous administration had approved. Today, this victory faces being overturned by an offshore tribunal answering to exclusively the companies petitioning it.

Last August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was convened to hear it.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this might be. Who is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary upholds it, then a overseas corporation contests it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously 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. Details are scarce of the case at present, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK enacted against him following the invasion of Ukraine. He has started suing a small nation on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these events could not occur. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An expert on this issue labelled activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That warning has come to pass. In the current period, energy and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – state efforts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP