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What is your understand our democratic process operates? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

Today, overseas companies, and the billionaires that control them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to corporations registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but funds the panel members conclude the company would perhaps have made. The administration may have to drop the legislation. It is deterred from passing future laws in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds finance suits in exchange for a share of the settlements. The outcome? Democratic sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by parliaments is that this provision has been incorporated – absent public approval, and often in a climate of total confidentiality – inside trade treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government later cancelled the permission the Tories had granted. Today, this legal outcome is under threat by an secret arbitration panel answering to exclusively the entities filing the suit.

During August, a corporate entity whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was convened to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. Which individual is representing it challenging the state? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK levied against him following the war in Ukraine. He has started suing a small nation with similar intent, seeking a colossal sum: an amount representing half state's yearly budget. Among the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, 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 issue labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, oil and gas and resource corporations have lodged a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to halt environmental catastrophe. Companies have so far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP