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Can you reckon our democratic process functions? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Secret Courts

Nowadays, international firms, and the billionaires who own them, can sue nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. The cases take place behind closed doors. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to entities operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but compensation the arbitrators decide the company might otherwise have made. The government may have to rescind the measure. It is discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being filed, as companies observe each other, and private equity fund legal actions in return for a cut of the takings. The consequence? National sovereignty and democratic governance are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the choices taken by legislatures is that this provision has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The justice ruled that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the permission the Tories had approved. Now, this success faces being overturned by an secret arbitration panel reporting to no one but the entities bringing the case.

During August, a company whose beneficial owners are located in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. What legal team is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it is highly possible that he may employ the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has already filed a claim against another European state for this reason, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Included in the legal team on his side? a prominent lawyer, married to the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen state funds as security for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this topic labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That prediction has come to pass. Recently, energy and resource corporations have initiated a historic level of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – state efforts to prevent global warming. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP