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How do you reckon our democratic process works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Yet, that was how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Today, foreign corporations, and the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, including businesses based in this country. They are open only to businesses based overseas.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but money the panel members determine the company might otherwise have made. The administration may have to drop the legislation. It is discouraged from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being brought, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The result? National sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings made by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The judge determined that schemes to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration then withdrew the permission the former government had issued. Now, this legal outcome is under threat by an foreign court reporting to only the entities bringing the case.

Last August, a company whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. Who is serving as its counsel against the British government? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him after the Russian aggression. He has already initiated proceedings against another European state for this reason, demanding sixteen billion dollars: half that nation's yearly budget. Among the counsel on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An adviser on this topic accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and resource corporations have filed a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP