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How do you understand our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at private courts composed of business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises operating from this country. Access is granted solely for corporations operating from foreign soil.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as companies learn from each other, and private equity fund legal actions in return for a share of the takings. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and often in an atmosphere of profound opacity – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice determined that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have no impact on national carbon targets. The Labour government later cancelled the consent the Tories had issued. Currently, this victory could be compromised by an secret arbitration panel reporting to only the entities filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. The public has no idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him after the Russian aggression. He has filed a claim against a small nation with similar intent, claiming a colossal sum: equivalent to half of state's yearly budget. Among the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen state funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a senior politician, championing the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this matter accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations start to realise the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. In the current period, oil and gas and resource corporations have lodged a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to stop global warming. Companies have to date won vast sums by using ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP