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What is your 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 become law. Statutes is upheld by the courts. That's it. However, that used to be how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires that control them, can sue governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even companies operating from this country. They are open solely for entities based overseas.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it may order compensation of vast sums, running into billions.

These sums represent not real financial harm but compensation the panel members decide the company would perhaps have made. The government could be forced to abandon its policy. It is discouraged from introducing similar legislation in that area, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and private equity fund legal actions in exchange for a share of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings made by legislatures is that this clause has been incorporated – without public consent, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Case: The UK Coalmine

A year ago, a conservation group secured a significant win at the High Court. The judge found that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The Labour government later cancelled the consent the previous administration had granted. Now, this victory faces being overturned by an secret arbitration panel reporting to exclusively the entities filing the suit.

In August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week 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 been permitted to commence operations. Citizens have no idea how much this might be. Which individual is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a foreign company challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he may employ the tribunal to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: half that state's yearly income. Included in the counsel representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this matter described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations grasp the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. This year, energy and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to stop global warming. Companies have to date won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP