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What is your understand our democratic process functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, or the oligarchs that control them, can sue nation states for the policies they pass, at private courts staffed by business advocates. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies operating from this country. The door is open only to corporations operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it can award damages of vast sums, running into billions.

These awards are based not on actual losses but money the arbitrators decide the company would perhaps have made. The state could be forced to drop the legislation. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as companies learn from each other, and investment funds fund legal actions in exchange for a cut of the settlements. The result? National sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices enacted by legislatures is that this clause has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the permission the Tories had approved. Now, this legal outcome could be compromised by an offshore tribunal answering to no one but the companies petitioning it.

Last August, a company whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the high court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half government’s yearly income. Part of the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that these scenarios could not occur. Years ago, a government leader, championing the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An expert on this matter accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That threat has come to pass. Recently, fossil fuel and extraction companies have filed a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to stop global warming. Companies have to date won $114bn by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP