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Can you reckon our democratic process operates? Maybe something like this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

In the modern era, foreign corporations, and the oligarchs who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses operating from this country. Access is granted only to entities based overseas.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but compensation the panel members conclude the company would perhaps have made. The state may have to abandon its policy. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being brought, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? Sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions made by elected bodies is that this provision has been written – absent public approval, and typically amid a climate of total confidentiality – into international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The judge ruled that proposals to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The new government then withdrew the consent the previous administration had granted. Currently, this success could be compromised by an offshore tribunal accountable to no one but the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have no clear indication how much this could amount to. What legal team is representing it challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government passes a law, the high court supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK imposed on him after the Russian aggression. He has already initiated proceedings against another European state on these grounds, claiming $16bn: an amount representing half nation's annual revenue. Included in the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” A consultant on this topic described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies begin to understand the power they’ve been granted, they will turn their attention from the weak nations to the strong ones” were met with general mockery.

That threat has now materialised. In the current period, fossil fuel and mining firms have filed a record number of cases against nations rich and poor, opposing – similar to the UK mine – official measures to prevent environmental catastrophe. Companies have thus far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP