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What is your reckon our democratic process functions? Maybe similar to 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. Well, that used to be how it once functioned. No longer.

The Emergence of Secret Courts

Today, foreign corporations, and the billionaires behind them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. In contrast to domestic courts, these panels allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, including businesses based in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums constitute not actual losses but money the tribunal officials determine the company would perhaps have made. The administration may have to abandon its policy. It becomes deterred from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as firms observe each other, and investment funds fund legal actions in return for a share of the takings. The outcome? Sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices enacted by elected bodies is that this clause has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The justice found that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the consent the former government had issued. Now, this success could be compromised by an offshore tribunal accountable to only the entities bringing the case.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has little idea how much this might be. What legal team is representing it against the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The government passes a law, the domestic court supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK levied against him following the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, claiming $16bn: half that nation's yearly budget. Included in the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that such things could not occur. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this matter described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “when companies grasp the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. This year, fossil fuel and mining firms have lodged a record number of suits against nations rich and poor, contesting – similar to the Whitehaven project – state efforts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP