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What is your reckon our democratic process functions? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that’s how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Today, international firms, along with the wealthy individuals behind them, can sue governments for the regulations they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, including businesses based in this country. They are open solely for businesses operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but compensation the panel members conclude the company would perhaps have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, worried about facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds fund legal actions in return for a cut of the takings. The result? Democratic sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices made by legislatures is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the former government had issued. Now, this success faces being overturned by an offshore tribunal answering to exclusively the corporations bringing the case.

In August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in Washington DC was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half state's annual revenue. Among the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these scenarios could not occur. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations grasp the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a historic level of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP