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Can you understand our democratic process works? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Emergence of Secret Tribunals

Today, foreign corporations, and the wealthy individuals behind them, can sue nation states for the regulations they pass, at private courts made up of business advocates. Such disputes take place in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including businesses based in this country. They are open only to entities based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but money the panel members decide the company would perhaps have made. The administration might be compelled to abandon its policy. It is deterred from introducing similar legislation along the same lines, worried about being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms learn from each other, and private equity fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings made by parliaments is that this stipulation has been inserted – absent public approval, and typically amid conditions of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, activists secured a significant win at the high court. The judge ruled that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the consent the former government had issued. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the companies bringing the case.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Recently a tribunal in the United States was established to hear it.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has little idea how much this might be. Who is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The state passes a law, the national judiciary supports it, then a foreign company contests it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has started suing a small nation for this reason, seeking $16bn: equivalent to half of nation's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have initiated a unprecedented number of suits against nations rich and poor, challenging – similar to the UK mine – state efforts to stop global warming. Companies have so far won $114bn by using ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP