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How do you perceive our democratic process operates? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. That's it. However, that used to be how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Nowadays, international firms, or the wealthy individuals who own them, have the power to sue governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies operating from this country. They are open exclusively to corporations based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but compensation the tribunal officials determine the company could potentially have made. The administration might be compelled to drop the legislation. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Running Rampant

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds fund legal actions in exchange for a portion of the awards. The result? National sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions made by parliaments is that this clause has been written – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge determined that proposals to dig the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the permission the former government had granted. Today, this victory could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

In August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Who is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK enacted against him after the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming sixteen billion dollars: half that state's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its financial support package stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Costs

Politicians promised that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this topic accused campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies start to realise the power they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That prediction is now a reality. Recently, oil and gas and extraction companies have initiated a unprecedented number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to halt climate breakdown. Corporations have so far won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP