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What is your understand our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that was how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, or the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. You or I cannot take a case to them, nor can our government, including companies based in this country. Access is granted only to entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but money the arbitrators determine the company could potentially have made. The administration could be forced to abandon its policy. It is deterred from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions made by legislatures is that this clause has been incorporated – without public consent, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that schemes to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Currently, this success faces being overturned by an secret arbitration panel reporting to no one but the entities bringing the case.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to proceed. We have no clear indication how much this could amount to. Who is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court validates it, then a foreign company disputes it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the Russian aggression. He has filed a claim against another European state on these grounds, seeking $16bn: an amount representing half state's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. Previously, a government leader, championing the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this topic accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “as corporations grasp the authority they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That warning has now materialised. Recently, energy and extraction companies have filed a historic level of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP