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Can you perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Emergence of Secret Arbitration Panels

Today, international firms, and the wealthy individuals that control them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. They are open only to businesses based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it may order compensation of vast sums, even billions.

This compensation constitute not actual losses but compensation the panel members conclude the company would perhaps have made. The administration might be compelled to rescind the measure. It will be discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being filed, as companies take cues from each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? National sovereignty and democracy are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the choices taken by elected bodies is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Case: The UK Coalmine

Last year, activists secured a significant win at the high court. The justice determined that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government later cancelled the consent the previous administration had approved. Today, this victory could be compromised by an foreign court reporting to no one but the corporations bringing the case.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to go ahead. We have little idea how much this sum represents. Which individual is serving as its counsel challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the high court upholds it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he’ll use the arbitration process to challenge the penalties the UK levied against him after the Russian aggression. He has previously started suing a small nation on these grounds, claiming a colossal sum: half that state's yearly income. Among the legal team on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as security for its financial support package stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That warning has now materialised. In the current period, fossil fuel and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP