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What is your reckon our democratic process works? Perhaps along the lines of this. We elect MPs. They vote on bills. Should a majority is secured, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Secret Courts

Today, foreign corporations, along with the wealthy individuals behind them, can sue nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held in secret. Unlike our courts, these bodies allow no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, or even companies based in this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but funds the arbitrators conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It becomes hesitant to passing future laws in that area, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in return for a portion of the takings. The consequence? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge ruled that proposals to excavate the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the consent the Tories had approved. Currently, this success could be compromised by an secret arbitration panel accountable to exclusively the companies filing the suit.

Last August, a company whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. Which individual is acting on its behalf against the state? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding sixteen billion dollars: half that state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this topic labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That prediction has come to pass. This year, energy and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP