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What is your perceive our democratic process functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, and the wealthy individuals behind them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted exclusively to businesses operating from foreign soil.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation are based not on actual losses but money the arbitrators determine the company could potentially have made. The state may have to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the choices made by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge determined that plans to dig the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had granted. Today, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies bringing the case.

In August, a company whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. We have little idea how much this might be. What legal team is serving as its counsel against the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The government enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as security for its financial support package is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these events could not occur. Previously, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That threat has now materialised. This year, energy and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won $114bn via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP