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How do you understand our democratic process works? Maybe something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Emergence of Secret Courts

In the modern era, international firms, or the wealthy individuals behind them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, including businesses headquartered in this country. They are open only to entities operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The state may have to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being initiated, as companies learn from each other, and private equity finance suits in exchange for a share of the takings. The consequence? Sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings enacted by parliaments is that this provision has been written – without public consent, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the consent the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal reporting to exclusively the corporations bringing the case.

In August, a company whose final controllers reside in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in Washington DC was set up to hear it.

This firm is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. We have no idea how much this could amount to. What legal team is acting on its behalf against the state? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he’ll use the tribunal to contest the sanctions the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, claiming $16bn: half that nation's yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that such things wouldn’t happen. In 2014, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this issue described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That prediction has now materialised. In the current period, oil and gas and extraction companies have lodged a record number of claims against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have so far won $114bn through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP