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Can you reckon our democratic process works? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Advent of Secret Courts

Nowadays, international firms, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at private courts composed of business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but compensation the arbitrators determine the company might otherwise have made. The government may have to rescind the measure. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as corporations learn from each other, and private equity finance suits for a share of a share of the settlements. The result? Sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings enacted by parliaments is that this provision has been written – without public consent, and typically amid an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Example: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Currently, this victory is under threat by an offshore tribunal accountable to exclusively the corporations bringing the case.

During August, a company whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. What legal team is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has started suing a small nation on these grounds, demanding a colossal sum: half that nation's yearly income. Included in the counsel representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Risks

Politicians promised that these events could not occur. Years ago, a government leader, advocating for the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That warning has now materialised. This year, oil and gas and extraction companies have filed a record number of claims against nations rich and poor, opposing – like the example of the UK mine – government attempts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP