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How do you reckon our democratic process works? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. End of story. However, that used to be how it used to work. Those days are over.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, or the billionaires behind them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises operating from this country. They are open only to entities operating from foreign soil.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These sums are based not on tangible damages but money the arbitrators conclude the company might otherwise have made. The administration could be forced to abandon its policy. It becomes discouraged from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of disputes are being initiated, as firms learn from each other, and investment funds finance suits for a share of a share of the settlements. The result? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in a climate of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the high court. The justice ruled that schemes to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The new government subsequently revoked the permission the Tories had issued. Today, this legal outcome could be compromised by an secret arbitration panel reporting to no one but the entities petitioning it.

During August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

The claimant is suing the UK for the money it might have made if the mine had received permission to commence operations. We have no idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot the MP. The state passes a law, the high court upholds it, then a foreign company disputes it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Case

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 wealthy Russian individual, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he may employ the tribunal to fight the restrictions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, demanding $16bn: equivalent to half of government’s yearly income. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over sovereign states might be preventing the finance Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that such things could not occur. Previously, a senior politician, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “when companies begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. In the current period, energy and mining firms have initiated a record number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP