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How do you perceive our democratic process functions? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Rise of Secret Courts

Today, foreign corporations, and the billionaires who own them, can sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted exclusively to corporations based overseas.

If a tribunal determines that a government measure may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

These sums constitute not real financial harm but compensation the panel members decide the company might otherwise have made. The state might be compelled to abandon its policy. It becomes hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being initiated, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? National sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices taken by elected bodies is that this provision has been inserted – absent public approval, and typically amid a climate of total confidentiality – into trade treaties.

A Specific Case: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge determined that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The incoming administration then withdrew the permission the Tories had issued. Now, this legal outcome is under threat by an secret arbitration panel accountable to exclusively the corporations petitioning it.

In August, a company whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. Which individual is serving as its counsel challenging the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case to date, but it appears probable that he may employ the tribunal to fight the restrictions the UK levied against him after the invasion of Ukraine. He has filed a claim against another European state on these grounds, demanding sixteen billion dollars: half that state's yearly income. Among the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a senior politician, championing the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this matter described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. In the current period, oil and gas and mining firms have initiated a historic level of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have so far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP