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What is your perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

Nowadays, overseas companies, and the wealthy individuals behind them, can sue nation states for the regulations they pass, at private courts composed of business advocates. The cases take place behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, including companies based in this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it can award compensation of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the arbitrators determine the company would perhaps have made. The state might be compelled to drop the legislation. It will be discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices taken by legislatures is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer found that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had granted. Today, this victory is under threat by an secret arbitration panel answering to only the companies petitioning it.

In August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the US capital was set up to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have no clear indication how much this might be. What legal team is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK imposed on him following the Russian aggression. He has previously filed a claim against a small nation on these grounds, seeking a colossal sum: half that nation's annual revenue. Part of the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as security for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that these events could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic labelled critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That threat has come to pass. This year, energy and mining firms have filed a record number of suits against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to halt environmental catastrophe. Firms have thus far won vast sums via ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP