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What is your understand our democratic process operates? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. That's it. However, that’s how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, and the wealthy individuals behind them, can sue nation states for the laws they pass, at private courts made up of business advocates. Such disputes take place behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies headquartered in this country. The door is open only to businesses based overseas.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

These awards represent not real financial harm but compensation the arbitrators decide the company would perhaps have made. The state could be forced to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and private equity fund legal actions for a share of a share of the awards. The outcome? Sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the decisions made by parliaments is that this stipulation has been incorporated – absent public approval, and often in conditions of extreme secrecy – into international trade agreements.

A Real-World Example: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The new government later cancelled the licence the former government had granted. Now, this victory faces being overturned by an foreign court accountable to no one but the entities filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. We have little idea how much this could amount to. Who is representing it against the state? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it seems likely that he will utilise the arbitration process to contest the penalties the UK imposed on him following the Russian aggression. He has started suing a small nation with similar intent, claiming sixteen billion dollars: half that state's annual revenue. Included in the legal team representing him there? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as security for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that such things were not possible. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this matter described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to stop climate breakdown. Firms have to date won vast sums through ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP