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Can you reckon our democratic process operates? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals composed of business advocates. The cases take place behind closed doors. Unlike our courts, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to corporations based overseas.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but compensation the panel members conclude the company might otherwise have made. The state could be forced to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being initiated, as companies learn from each other, and private equity fund legal actions in return for a cut of the takings. The result? Democratic sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the licence the former government had approved. Now, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel against the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration passes a law, the high court supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has previously started suing another European state on these grounds, claiming a colossal sum: equivalent to half of nation's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An expert on this matter accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms start to realise the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That threat is now a reality. This year, energy and extraction companies have initiated a historic level of cases against nations rich and poor, challenging – like the example of the UK mine – official measures to prevent global warming. Companies have to date won $114bn through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP