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What is your understand our democratic process functions? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Yet, that was how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Nowadays, overseas companies, or the billionaires who own them, can sue elected administrations for the policies they pass, at private courts composed of corporate lawyers. The cases take place in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to entities based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but money the tribunal officials decide the company could potentially have made. The state might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a share of the takings. The consequence? Sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions made by elected bodies is that this provision has been inserted – without public consent, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The justice determined that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the Tories had granted. Today, this legal outcome faces being overturned by an foreign court answering to no one but the companies bringing the case.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK imposed on him after the war in Ukraine. He has already initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts contend that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a issue in the past.” An expert on this matter accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms grasp the authority they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have so far won vast sums via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP