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Can you reckon our democratic process operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. That's it. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, can sue governments for the regulations they pass, at offshore tribunals staffed by business advocates. The cases take place behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but funds the tribunal officials decide the company might otherwise have made. The administration may have to drop the legislation. It becomes deterred from enacting future policies along the same lines, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions enacted by legislatures is that this clause has been inserted – without public consent, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The UK Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Today, this victory is under threat by an foreign court accountable to exclusively the corporations filing the suit.

In August, a corporate entity whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have little idea how much this might be. What legal team is acting on its behalf challenging the state? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Challenge

On the same day that the court on the coalmine case was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it seems likely that he will utilise the tribunal to contest the sanctions the UK enacted against him after the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming $16bn: equivalent to half of government’s yearly budget. Among the counsel representing him there? a prominent lawyer, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that such things were not possible. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” An adviser on this issue accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “when companies start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to halt climate breakdown. Firms have to date won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP