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What is your perceive our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. However, that’s how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, or the billionaires that control them, have the power to sue nation states for the regulations they pass, at private courts staffed by corporate lawyers. The cases take place away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses based in this country. They are open exclusively to entities based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on real financial harm but money the tribunal officials decide 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, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings enacted by legislatures is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Specific Instance: The UK Coalmine

A year ago, a conservation group won a great victory at the High Court. The judge determined that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the licence the Tories had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the companies bringing the case.

In August, a firm whose beneficial owners are based in the tax haven lodged a claim against the UK government. Last week a tribunal in the United States was established to adjudicate on it.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to proceed. The public has little idea how much this could amount to. What legal team is representing it challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he may employ the tribunal to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of government’s annual revenue. Included in the lawyers on his side? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that such things could not occur. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An expert on this topic described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, oil and gas and mining firms have filed a unprecedented number of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP