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How do you understand our democratic process operates? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, and the billionaires that control them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted only to corporations registered abroad.

Should an arbitration panel finds that a law or policy may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These sums represent not tangible damages but compensation the panel members conclude the company could potentially have made. The state could be forced to drop the legislation. It will be discouraged from passing future laws in that area, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The outcome? Democratic sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the rulings made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under a climate of profound opacity – into trade treaties.

A Concrete Case: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the consent the previous administration had approved. Currently, this legal outcome is under threat by an foreign court accountable to only the companies bringing the case.

Last August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had received permission to proceed. The public has no clear indication how much this might be. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has previously started suing another European state for this reason, demanding a colossal sum: half that government’s yearly income. Included in the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that these events were not possible. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has now materialised. This year, energy and mining firms have filed a record number of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP