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How do you reckon our democratic process functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Emergence of Secret Tribunals

Today, overseas companies, and the wealthy individuals behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these bodies allow no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. Access is granted only to corporations based overseas.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

This compensation are based not on tangible damages but compensation the arbitrators conclude the company could potentially have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, worried about being sued.

A System Growing Exponentially

Unprecedented levels of disputes are being initiated, as firms take cues from each other, and private equity finance suits in exchange for a cut of the awards. The result? National sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and often in an atmosphere of total confidentiality – within trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the permission the former government had granted. Today, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the entities petitioning it.

During August, a company whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. The previous week a tribunal in the US capital was established to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Who is acting on its behalf against the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it seems likely that he will utilise the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has previously started suing a small nation with similar intent, claiming sixteen billion dollars: half that government’s yearly income. Included in the legal team on his side? a prominent lawyer, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that such things were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction has come to pass. Recently, oil and gas and extraction companies have initiated a unprecedented number of claims against nations rich and poor, opposing – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have obtained the majority. That represents the combined GDP