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Can you reckon our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Secret Courts

In the modern era, foreign corporations, and the billionaires that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are conducted in secret. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including enterprises operating from this country. Access is granted exclusively to corporations based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but compensation the panel members determine the company could potentially have made. The government might be compelled to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and investment funds fund legal actions in exchange for a share of the awards. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices enacted by parliaments is that this clause has been incorporated – without public consent, and frequently under conditions of extreme secrecy – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The new government then withdrew the permission the Tories had approved. Today, this legal outcome could be compromised by an foreign court accountable to only the companies bringing the case.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in the US capital was established to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him following the war in Ukraine. He has already started suing Luxembourg with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Among the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that these events wouldn’t happen. In 2014, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this matter described campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. This year, fossil fuel and mining firms have lodged a record number of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP