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What is your reckon our democratic process functions? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that used to be how it used to work. Those days are over.

The Emergence of Secret Courts

In the modern era, foreign corporations, and the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. The cases take place away from public scrutiny. Differing from national judiciaries, these bodies grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to entities based overseas.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The government could be forced to abandon its policy. It is discouraged from enacting future policies in that area, for fear of facing litigation.

A System Running Rampant

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a share of the takings. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings enacted by legislatures is that this stipulation has been inserted – without public consent, and often in conditions of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, activists secured a significant win at the high court. The judge found that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the licence the former government had approved. Currently, this legal outcome faces being overturned by an secret arbitration panel accountable to only the entities petitioning it.

In August, a corporate entity whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. We have little idea how much this could amount to. What legal team is representing it against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The government passes a law, the domestic court supports it, then a foreign company disputes it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK enacted against him after the Russian aggression. He has started suing Luxembourg on these grounds, demanding $16bn: an amount representing half state's yearly income. Among the counsel representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that such things could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms grasp the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That threat is now a reality. Recently, energy and mining firms have filed a record number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP