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What is your perceive our democratic process functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that used to be how it used to work. Those days are over.

The Emergence of Secret Tribunals

Today, foreign corporations, or the wealthy individuals behind them, can sue governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. The cases take place in secret. Unlike our courts, these bodies provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including companies operating from this country. They are open only to corporations based overseas.

When a secret court rules that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but money the tribunal officials conclude the company would perhaps have made. The administration could be forced to abandon its policy. It will be deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as firms learn from each other, and hedge funds finance suits in exchange for a cut of the takings. The result? Sovereignty and popular rule are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings made by elected bodies is that this stipulation has been written – absent public approval, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Concrete Case: The UK Coalmine

A year ago, activists secured a significant win at the senior court. The presiding officer determined that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The Labour government later cancelled the licence the former government had issued. Today, this legal outcome could be compromised by an offshore tribunal answering to only the companies filing the suit.

During August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Who is acting on its behalf against the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a international entity challenges it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against another European state for this reason, seeking $16bn: equivalent to half of nation's yearly income. Among the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that such things were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That warning has now materialised. In the current period, fossil fuel and extraction companies have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP