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Can you understand our democratic process functions? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Nowadays, foreign corporations, or the billionaires behind them, can sue nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are conducted in secret. Unlike our courts, these bodies allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even companies based in this country. They are open only to entities registered abroad.

Should an arbitration panel rules that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, even billions.

This compensation are based not on tangible damages but funds the arbitrators conclude the company might otherwise have made. The government may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as corporations observe each other, and hedge funds finance suits for a share of a portion of the settlements. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

A year ago, a conservation group secured a significant win at the high court. The judge determined that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the former government had approved. Now, this success is under threat by an secret arbitration panel answering to exclusively the companies filing the suit.

In August, a company whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the United States was set up to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Which individual is representing it challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case so far, but it seems likely that he may employ the tribunal to contest the restrictions the UK imposed on him following the Russian aggression. He has already initiated proceedings against a small nation for this reason, claiming a colossal sum: an amount representing half state's yearly income. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that these scenarios could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies start to realise the authority they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That warning is now a reality. Recently, energy and mining firms have initiated a record number of cases against nations rich and poor, contesting – like the example of the UK mine – government attempts to stop global warming. Firms have to date won vast sums through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP