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What is your reckon our democratic process functions? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that’s how it used to work. No longer.

The Advent of Secret Tribunals

In the modern era, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These sums are based not on tangible damages but funds the tribunal officials conclude the company could potentially have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A System Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and hedge funds finance suits for a share of a share of the awards. The result? Sovereignty and democracy are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Last year, activists won a great victory at the high court. The justice ruled that plans to open the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no consequence on national carbon targets. The new government later cancelled the consent the previous administration had granted. Today, this victory faces being overturned by an offshore tribunal accountable to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been permitted to go ahead. Citizens have no idea how much this could amount to. Which individual is representing it challenging the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The administration passes a law, the high court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK enacted against him after the Russian aggression. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this matter described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a record number of suits against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP