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Can you understand our democratic process operates? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. However, that’s how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

Today, overseas companies, or the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at private courts composed of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these panels provide no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company might otherwise have made. The state may have to rescind the measure. It will be hesitant to enacting future policies of a similar nature, for fear of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as firms learn from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings made by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The new government then withdrew the consent the Tories had approved. Now, this success is under threat by an offshore tribunal accountable to only the companies petitioning it.

During August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the United States was established to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. We have no idea how much this could amount to. Who is serving as its counsel against the state? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The government makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK enacted against him after the Russian aggression. He has already started suing Luxembourg on these grounds, seeking a colossal sum: half that nation's annual revenue. Included in the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, stated: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this issue accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “once firms start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with scepticism.

That prediction is now a reality. In the current period, oil and gas and resource corporations have filed a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have so far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP