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How do you reckon our democratic process works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Rise of Secret Tribunals

In the modern era, foreign corporations, along with the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it may order damages of vast sums, running into billions.

These awards are based not on actual losses but compensation the panel members determine the company could potentially have made. The state may have to abandon its policy. It will be deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as corporations learn from each other, and hedge funds fund legal actions for a share of a share of the awards. The consequence? National sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices taken by legislatures is that this stipulation has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the High Court. The presiding officer determined that schemes to open the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on climate commitments. The new government subsequently revoked the permission the former government had issued. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the companies filing the suit.

In August, a company whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The company is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Which individual is representing it against the state? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the national judiciary validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it seems likely that he may employ the arbitration process to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the legal team on his side? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these scenarios were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this topic described activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with general mockery.

That prediction is now a reality. Recently, energy and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to halt climate breakdown. Firms have thus far won vast sums via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP