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Can you reckon our democratic process works? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Rise of Secret Tribunals

In the modern era, overseas companies, or the billionaires that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases take place in secret. Unlike our courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards are based not on tangible damages but compensation the panel members determine the company would perhaps have made. The government could be forced to rescind the measure. It will be deterred from passing future laws of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as companies learn from each other, and investment funds fund legal actions in return for a cut of the awards. The consequence? Democratic sovereignty and democracy are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions enacted by elected bodies is that this provision has been incorporated – absent public approval, and frequently under a climate of profound opacity – into trade treaties.

A Specific Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The judge ruled that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have had no impact on climate commitments. The incoming administration later cancelled the licence the Tories had issued. Currently, this legal outcome faces being overturned by an foreign court accountable to no one but the companies filing the suit.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. Last week a dispute settlement body in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. Citizens have no idea how much this could amount to. Which individual is representing it against the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to fight the penalties the UK imposed on him after the invasion of Ukraine. He has already started suing Luxembourg with similar intent, seeking $16bn: equivalent to half of state's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Risks

The public was told that these scenarios could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Warnings that “when companies begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to stop global warming. Companies have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP