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How do you understand our democratic process operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Today, foreign corporations, or the wealthy individuals who own them, have the power to sue nation states for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but money the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It becomes discouraged from enacting future policies in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as companies take cues from each other, and investment funds finance suits for a share of a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions enacted by elected bodies is that this clause has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on climate commitments. The new government then withdrew the consent the previous administration had approved. Now, this success is under threat by an secret arbitration panel accountable to exclusively the companies petitioning it.

In August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this could amount to. Who is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: half that government’s yearly budget. Included in the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized state 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 extraordinary, secretive influence over sovereign states might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that such things could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue described critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations begin to understand the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction has now materialised. This year, energy and resource corporations have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the UK mine – state efforts to stop global warming. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP