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How do you understand our democratic process works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Rise of Secret Courts

In the modern era, overseas companies, or the billionaires that control them, have the power to sue governments for the regulations they pass, at private courts composed of corporate lawyers. Such disputes are held behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for entities registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it can award damages of vast sums, even billions.

This compensation constitute not tangible damages but compensation the arbitrators decide the company would perhaps have made. The government could be forced to rescind the measure. It becomes discouraged from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being brought, as corporations learn from each other, and private equity finance suits in return for a share of the takings. The outcome? Sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of extreme secrecy – into international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The judge ruled that plans to open the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on our carbon budgets. The Labour government then withdrew the licence the former government had issued. Today, this success could be compromised by an offshore tribunal reporting to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in the United States was convened to consider the case.

This firm is suing the UK for the money it would have generated if the mine had been permitted to go ahead. The public has no idea how much this might be. Who is representing it against the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a overseas corporation contests it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it appears probable that he’ll use the arbitration process to contest the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of government’s yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Escalating Threats

We were assured that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has never been a case in the past.” An adviser on this topic labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has come to pass. Recently, oil and gas and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have to date won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP