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How do you reckon our democratic process functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Rise of Secret Courts

Nowadays, foreign corporations, along with the billionaires behind them, can sue nation states for the regulations they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these tribunals grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open only to businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the arbitrators determine the company could potentially have made. The state might be compelled to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Running Rampant

Record numbers of disputes are being brought, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings taken by legislatures is that this clause has been inserted – without public consent, and typically amid a climate of profound opacity – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the permission the Tories had approved. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the entities petitioning it.

During August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

This firm is suing the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he may employ the arbitration process 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, demanding $16bn: an amount representing half state's annual revenue. Included in the counsel representing him there? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these scenarios could not occur. Years ago, a government leader, championing the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” A consultant on this issue described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That warning has now materialised. Recently, oil and gas and extraction companies have filed a record number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have to date won $114bn through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP