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Can you perceive our democratic process works? Perhaps similar to this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. Well, that used to be how it once functioned. Those days are over.

The Rise of Secret Tribunals

Today, international firms, along with the billionaires behind them, can sue governments for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even companies based in this country. They are open only to businesses based overseas.

If a tribunal finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

This compensation represent not actual losses but compensation the tribunal officials conclude the company would perhaps have made. The state could be forced to drop the legislation. It becomes hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the takings. The result? Democratic sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the choices taken by parliaments is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Real-World Example: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the permission the previous administration had issued. Now, this victory could be compromised by an foreign court answering to no one but the companies filing the suit.

During August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the US capital was convened to adjudicate on it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have no clear indication how much this might be. What legal team is representing it against the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the domestic court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it seems likely that he’ll use the tribunal to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, claiming $16bn: half that government’s yearly budget. Included in the counsel on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An expert on this issue described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That threat is now a reality. This year, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP