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What is your understand our democratic process functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Today, foreign corporations, or the billionaires that control them, can sue nation states for the laws they pass, at private courts composed of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals provide no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open solely for corporations based overseas.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions, potentially billions.

This compensation represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The state could be forced to rescind the measure. It will be hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as corporations observe each other, and hedge funds finance suits for a share of a portion of the settlements. The result? Democratic sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices made by elected bodies is that this stipulation has been written – absent public approval, and often in an atmosphere of profound opacity – into international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the High Court. The judge determined that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government subsequently revoked the licence the Tories had approved. Currently, this victory is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

Last August, a company whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. Which individual is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the high court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the court on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation on these grounds, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the counsel on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that these events wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms start to realise the authority they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That threat has come to pass. In the current period, energy and mining firms have lodged a record number of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have so far won $114bn by using ISDS, of which energy giants have secured $84bn. That equates to the combined GDP