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How do you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Rise of Secret Tribunals

Today, overseas companies, and the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but compensation the panel members conclude the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of cases are being brought, as corporations take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The outcome? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings taken by parliaments is that this clause has been inserted – without public consent, and often in a climate of total confidentiality – inside trade treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the High Court. The judge determined that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this victory is under threat by an foreign court accountable to no one but the corporations filing the suit.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. We have no idea how much this could amount to. What legal team is serving as its counsel against the British government? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Among the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Costs

Politicians promised that these events wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic described activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the influence they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has come to pass. Recently, fossil fuel and extraction companies have lodged a historic level of suits against nations rich and poor, challenging – as in the case of the UK mine – state efforts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP