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What is your perceive our democratic process operates? Maybe similar to this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Rise of Secret Courts

In the modern era, foreign corporations, or the billionaires behind them, can sue elected administrations for the policies they pass, at private courts staffed by corporate lawyers. The cases are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. You or I cannot take a case to them, nor can our government, or even businesses based in this country. They are open only to entities operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These sums represent not tangible damages but money the panel members decide the company might otherwise have made. The government could be forced to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations observe each other, and hedge funds finance suits in return for a share of the takings. The result? Sovereignty and popular rule are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of profound opacity – inside international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government subsequently revoked the licence the previous administration had issued. Now, this legal outcome is under threat by an secret arbitration panel accountable to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. We have no idea how much this sum represents. Who is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot the MP. The state enacts a policy, the national judiciary validates it, then a international entity disputes it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it appears probable that he will utilise the arbitration process to contest the penalties the UK enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, demanding a colossal sum: half that nation's yearly budget. Included in the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that such things wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this matter described activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “once firms grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. This year, energy and extraction companies have initiated a historic level of cases against nations rich and poor, opposing – similar to the UK mine – state efforts to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP