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How do you understand our democratic process functions? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, and the billionaires who own them, can sue governments for the policies they pass, at secret arbitration panels composed of business advocates. The cases take place in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including enterprises based in this country. They are open exclusively to businesses registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

These sums are based not on real financial harm but money the panel members decide the company might otherwise have made. The government may have to rescind the measure. It will be discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices enacted by legislatures is that this provision has been written – absent public approval, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the senior court. The presiding officer ruled that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government subsequently revoked the permission the previous administration had granted. Today, this legal outcome is under threat by an foreign court reporting to exclusively the companies filing the suit.

During 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 Washington DC was set up to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had received permission to proceed. The public has little idea how much this sum represents. Which individual is representing it challenging the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the sanctions the UK levied against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of state's yearly income. Included in the legal team representing him there? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these events could not occur. Previously, a government leader, championing the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That threat is now a reality. In the current period, energy and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP