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What is your reckon our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that’s how it used to work. No longer.

The Rise of Secret Arbitration Panels

Today, foreign corporations, along with the billionaires that control them, have the power to sue governments for the regulations they pass, at private courts composed of commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even businesses based in this country. The door is open only to entities operating from foreign soil.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums constitute not tangible damages but compensation the panel members decide the company would perhaps have made. The state may have to rescind the measure. It will be discouraged from passing future laws in that area, due to the risk of being sued.

A Process Running Rampant

Record numbers of disputes are being initiated, as corporations observe each other, and investment funds finance suits in return for a share of the settlements. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the choices made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The new government then withdrew the permission the Tories had granted. Now, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the companies petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this might be. Which individual is representing it against the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The state passes a law, the high court validates it, then a overseas corporation disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it seems likely that he may employ the tribunal to fight the penalties the UK imposed on him following the war in Ukraine. He has filed a claim against a small nation with similar intent, claiming sixteen billion dollars: an amount representing half state's annual revenue. Part of the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Costs

We were assured that these scenarios were not possible. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this issue labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have lodged a historic level of suits against nations both wealthy and developing, challenging – similar to the UK mine – official measures to stop global warming. Companies have so far won vast sums by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP