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What is your reckon our democratic process works? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Yet, that used to be how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, international firms, and the billionaires who own them, have the power to sue nation states for the regulations they pass, at private courts composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open exclusively to corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but funds the arbitrators conclude the company would perhaps have made. The state might be compelled to rescind the measure. It will be hesitant to passing future laws of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The result? Sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Instance: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The Labour government later cancelled the licence the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations bringing the case.

Last August, a company whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was established to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Which individual is serving as its counsel against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing a small nation on these grounds, demanding $16bn: an amount representing half government’s yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that such things wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this topic labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “once firms start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That warning is now a reality. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP