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Can you perceive our democratic process functions? Maybe similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that’s how it once functioned. Those days are over.

The Advent of Secret Tribunals

Today, foreign corporations, along with the wealthy individuals that control them, can sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, including enterprises based in this country. The door is open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

This compensation constitute not real financial harm but money the arbitrators decide the company would perhaps have made. The administration may have to drop the legislation. It will be hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The outcome? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices made by elected bodies is that this provision has been written – without democratic mandate, and typically amid a climate of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The Labour government then withdrew the licence the previous administration had issued. Now, this success could be compromised by an offshore tribunal answering to exclusively the entities filing the suit.

In August, a firm whose final controllers are based in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. Citizens have little idea how much this might be. Who is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The state passes a law, the national judiciary supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against another European state with similar intent, claiming $16bn: equivalent to half of nation's yearly income. Among the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in using frozen state funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these scenarios were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies grasp the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the UK mine – government attempts to stop global warming. Corporations have to date won vast sums via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP