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How do you perceive our democratic process works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that was how it used to work. Those days are over.

The Rise of Secret Tribunals

In the modern era, international firms, and the wealthy individuals that control them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even businesses operating from this country. They are open exclusively to businesses based overseas.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company might otherwise have made. The administration could be forced to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, due to the risk of being sued.

A System Running Rampant

Record numbers of disputes are being filed, as companies observe each other, and hedge funds finance suits for a share of a share of the settlements. The outcome? Democratic sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings taken by parliaments is that this provision has been written – absent public approval, and typically amid a climate of profound opacity – inside trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The judge determined that plans to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have no impact on national carbon targets. The new government later cancelled the licence the former government had granted. Now, this victory could be compromised by an secret arbitration panel reporting to no one but the companies filing the suit.

During August, a company whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in the United States was set up to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. What legal team is serving as its counsel in opposition to the state? A member of parliament, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that government’s yearly income. Among the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine critically depends on.

False Assurances and Escalating Risks

Politicians promised that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this topic labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. This year, oil and gas and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP