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Can you perceive our democratic process works? It could be along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, along with the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, including companies based in this country. They are open only to corporations based overseas.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it can award damages of vast sums, even billions.

These awards constitute not actual losses but money the arbitrators decide the company might otherwise have made. The administration could be forced to rescind the measure. It will be discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as companies take cues from each other, and investment funds fund legal actions in return for a share of the awards. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions made by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of profound opacity – into international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Today, this success faces being overturned by an offshore tribunal reporting to exclusively the entities bringing the case.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. We have no idea how much this sum represents. Who is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against another European state with similar intent, claiming $16bn: an amount representing half government’s yearly income. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that such things could not occur. In 2014, a government leader, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That warning has come to pass. This year, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to stop global warming. Firms have to date won vast sums by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP