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Can you perceive our democratic process operates? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Advent of Secret Courts

Nowadays, overseas companies, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open only to businesses operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These awards constitute not tangible damages but compensation the arbitrators conclude the company could potentially have made. The government may have to rescind the measure. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices made by parliaments is that this provision has been written – without democratic mandate, and frequently under conditions of total confidentiality – within international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer determined that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the permission the former government had granted. Now, this success faces being overturned by an foreign court reporting to only the corporations bringing the case.

During August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Who is acting on its behalf against the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The state enacts a policy, the domestic court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: half that government’s yearly budget. Among the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that such things were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An expert on this issue accused activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat has now materialised. This year, oil and gas and resource corporations have initiated a unprecedented number of suits against nations rich and poor, opposing – like the example of the UK mine – government attempts to prevent climate breakdown. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP