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Can you understand our democratic process functions? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

Today, foreign corporations, along with the wealthy individuals who own them, are able to litigate against nation states for the regulations they pass, at private courts composed of commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises headquartered in this country. They are open solely for corporations based overseas.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These awards are based not on real financial harm but money the arbitrators decide the company would perhaps have made. The state might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and investment funds fund legal actions in return for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by parliaments is that this stipulation has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration later cancelled the consent the former government had approved. Today, this victory could be compromised by an foreign court reporting to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no idea how much this might be. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case to date, but it seems likely that he may employ the tribunal to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding $16bn: an amount representing half nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that such things were not possible. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this matter labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat is now a reality. Recently, energy and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Firms have to date won vast sums by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP