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What is your perceive our democratic process works? Perhaps along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

Nowadays, international firms, or the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are held behind closed doors. Unlike our courts, these bodies grant no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, including companies headquartered in this country. They are open solely for corporations based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These awards are based not on tangible damages but money the tribunal officials conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes hesitant to enacting future policies along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as corporations observe each other, and private equity bankroll lawsuits for a share of a portion of the takings. The result? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the choices enacted by legislatures is that this stipulation has been inserted – without public consent, and typically amid conditions of extreme secrecy – into international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the licence the previous administration had granted. Now, this legal outcome faces being overturned by an secret arbitration panel answering to only the entities petitioning it.

During August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to proceed. The public has no clear indication how much this might be. Who is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK imposed on him after the war in Ukraine. He has already filed a claim against a small nation for this reason, claiming sixteen billion dollars: half that state's yearly income. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen state funds as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the finance Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that these events could not occur. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this issue accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms start to realise the power they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That prediction has come to pass. This year, fossil fuel and extraction companies have filed a record number of suits against nations rich and poor, challenging – similar to the Whitehaven project – official measures to halt climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP