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How do you perceive our democratic process works? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Rise of Secret Courts

Nowadays, international firms, along with the wealthy individuals behind them, have the power to sue nation states for the regulations they pass, at private courts composed of business advocates. The cases are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open exclusively to entities registered abroad.

If a tribunal determines that a legislative action could harm the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

These awards represent not real financial harm but funds the arbitrators decide the company would perhaps have made. The state could be forced to abandon its policy. It becomes discouraged from passing future laws in that area, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and private equity finance suits for a share of a share of the takings. The outcome? Sovereignty and democratic governance are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions made by elected bodies is that this provision has been incorporated – without public consent, and typically amid conditions of extreme secrecy – within international trade agreements.

A Concrete Case: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the permission the previous administration had granted. Today, this legal outcome faces being overturned by an foreign court reporting to only the entities filing the suit.

Last August, a company whose beneficial owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no idea how much this sum represents. What legal team is serving as its counsel in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, seeking sixteen billion dollars: an amount representing half government’s yearly income. Among the legal team on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that such things could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An adviser on this matter labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat is now a reality. Recently, fossil fuel and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP