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What is your reckon our democratic process operates? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Advent of Secret Tribunals

In the modern era, foreign corporations, along with the oligarchs behind them, can sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but funds the panel members decide the company could potentially have made. The government could be forced to rescind the measure. It is deterred from enacting future policies along the same lines, worried about being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits for a share of a cut of the settlements. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – into trade treaties.

A Concrete Example: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The justice found that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on climate commitments. The incoming administration then withdrew the licence the former government had approved. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the companies petitioning it.

Last August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no idea how much this might be. Which individual is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration enacts a policy, the high court validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it is highly possible that he may employ the tribunal to contest the sanctions the UK levied against him after the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, claiming a colossal sum: equivalent to half of state's yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that such things could not occur. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this issue described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That threat has now materialised. In the current period, oil and gas and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP