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How do you reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of business advocates. The cases are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. The door is open only to corporations registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but funds the arbitrators decide the company might otherwise have made. The state might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as corporations learn from each other, and hedge funds fund legal actions for a share of a cut of the settlements. The outcome? Democratic sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices made by legislatures is that this stipulation has been written – without public consent, and typically amid a climate of total confidentiality – inside international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the permission the former government had approved. Now, this victory could be compromised by an foreign court answering to exclusively the corporations bringing the case.

During August, a firm whose final controllers reside in the tax haven filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. What legal team is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a overseas corporation contests it through an secretive private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, seeking a colossal sum: an amount representing half state's yearly income. Part of the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this issue labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were greeted by scepticism.

That threat has now materialised. Recently, energy and mining firms have filed a historic level of claims against nations across the economic spectrum, contesting – similar to the Whitehaven project – official measures to stop climate breakdown. Firms have thus far won $114bn by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP