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Can you understand our democratic process functions? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Rise of Secret Tribunals

Nowadays, international firms, along with the oligarchs who own them, can sue elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted in secret. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for entities based overseas.

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

These awards represent not tangible damages but money the arbitrators decide the company might otherwise have made. The state may have to drop the legislation. It will be deterred from enacting future policies in that area, for fear of being sued.

A Process Running Rampant

Record numbers of cases are being brought, as firms learn from each other, and private equity finance suits in exchange for a share of the takings. The result? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this provision has been written – absent public approval, and frequently under an atmosphere of profound opacity – into international trade agreements.

A Concrete Example: The UK Coalmine

Last year, activists secured a significant win at the senior court. The judge found that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the consent the previous administration had granted. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the companies bringing the case.

Last August, a corporate entity whose final controllers are located in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in the United States was convened to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to go ahead. The public has no idea how much this could amount to. Who is representing it against the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it appears probable that he may employ the arbitration process to fight the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the counsel representing him there? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that these scenarios were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this matter labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about such legal actions. Warnings that “once firms grasp the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That threat is now a reality. This year, fossil fuel and extraction companies have filed a record number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP