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Can you understand our democratic process works? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, or the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at private courts made up of business advocates. The cases take place behind closed doors. Unlike our courts, these panels grant no right of appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to businesses registered abroad.

When a secret court determines that a legislative action could harm the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These awards constitute not actual losses but compensation the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It will be discouraged from enacting future policies along the same lines, for fear of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations learn from each other, and hedge funds finance suits in exchange for a cut of the settlements. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices taken by parliaments is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The judge determined that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The new government later cancelled the permission the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the entities filing the suit.

Last August, a firm whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it seems likely that he may employ the arbitration process to contest the sanctions the UK levied against him after the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, claiming $16bn: an amount representing half nation's annual revenue. Part of the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these events were not possible. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this topic accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. This year, oil and gas and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP