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How do you understand our democratic process works? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that was how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, along with the billionaires behind them, have the power to sue nation states for the regulations they pass, at private courts composed of corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, including companies headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

This compensation are based not on real financial harm but money the arbitrators conclude the company could potentially have made. The state might be compelled to drop the legislation. It is discouraged from passing future laws of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being filed, as firms learn from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The result? Sovereignty and popular rule are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions made by legislatures is that this provision has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The judge determined that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration then withdrew the licence the Tories had granted. Today, this success could be compromised by an secret arbitration panel reporting to exclusively the companies petitioning it.

In August, a company whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this sum represents. Who is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration passes a law, the national judiciary supports it, then a foreign company disputes it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case at present, but it appears probable that he’ll use the tribunal to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against another European state on these grounds, demanding a colossal sum: equivalent to half of state's yearly income. Among the counsel representing him there? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Costs

We were assured that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this issue labelled critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have to date won vast sums through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP