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How do you understand our democratic process works? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Arbitration Panels

Nowadays, international firms, or the billionaires who own them, can sue governments for the regulations they pass, at private courts made up of commercial attorneys. Such disputes take place in secret. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These sums constitute not actual losses but compensation the arbitrators decide the company might otherwise have made. The state could be forced to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being filed, as corporations take cues from each other, and hedge funds finance suits for a share of a share of the takings. The result? Sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings enacted by elected bodies is that this provision has been inserted – without public consent, and frequently under a climate of profound opacity – into trade treaties.

A Specific Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge ruled that plans to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The Labour government subsequently revoked the permission the Tories had approved. Currently, this success is under threat by an foreign court answering to only the entities filing the suit.

During August, a company whose ultimate owners are located in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to commence operations. We have little idea how much this could amount to. Who is serving as its counsel against the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he’ll use the arbitration process to fight the restrictions the UK enacted against him after the Russian aggression. He has started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that state's yearly budget. Included in the counsel acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these events could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That warning has come to pass. Recently, fossil fuel and resource corporations have lodged a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to stop global warming. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP