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How do you perceive our democratic process works? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. However, that was how it used to work. Not anymore.

The Rise of Secret Tribunals

In the modern era, foreign corporations, or the oligarchs who own them, are able to litigate against governments for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or legal review. You or I are unable to file a case to them, nor can our government, including enterprises operating from this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums represent not actual losses but money the tribunal officials determine the company might otherwise have made. The government could be forced to drop the legislation. It becomes discouraged from enacting future policies along the same lines, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being initiated, as companies learn from each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and democratic governance are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the rulings taken by parliaments is that this provision has been written – absent public approval, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Specific Case: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the senior court. The justice ruled that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Currently, this victory could be compromised by an secret arbitration panel reporting to exclusively the entities bringing the case.

Last August, a corporate entity whose final controllers reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to proceed. We have little idea how much this could amount to. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he’ll use the arbitration process to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, seeking a colossal sum: equivalent to half of government’s yearly budget. Part of the legal team acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Costs

Politicians promised that such things could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies grasp the influence they now possess, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That warning has now materialised. This year, fossil fuel and extraction companies have lodged a historic level of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP