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How do you reckon our democratic process works? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Secret Tribunals

In the modern era, international firms, or the oligarchs that control them, are able to litigate against nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases are held away from public scrutiny. Unlike our courts, these panels grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. They are open only to entities based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but funds the panel members determine the company could potentially have made. The administration could be forced to drop the legislation. It will be deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and private equity fund legal actions in return for a share of the settlements. The result? National sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices taken by legislatures is that this provision has been inserted – without public consent, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group secured a significant win at the senior court. The judge found that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the permission the Tories had approved. Currently, this victory could be compromised by an foreign court reporting to only the companies petitioning it.

In August, a firm whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Which individual is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK levied against him after the Russian aggression. He has filed a claim against another European state on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this issue described activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That warning has come to pass. This year, energy and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP