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What is your reckon our democratic process functions? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Rise of Secret Tribunals

Today, international firms, along with the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted in secret. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. The door is open only to businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but funds the panel members determine the company might otherwise have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws along the same lines, due to the risk of being sued.

A System Growing Exponentially

Record numbers of disputes are being initiated, as corporations take cues from each other, and hedge funds finance suits in exchange for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the rulings enacted by legislatures is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the senior court. The justice found that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Now, this success could be compromised by an foreign court answering to exclusively the companies filing the suit.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to commence operations. We have little idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the high court upholds it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he’ll use the tribunal to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of state's yearly income. Part of the legal team acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that such things could not occur. In 2014, a government leader, championing the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this matter accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Predictions that “when companies grasp the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have filed a historic level of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP