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What is your understand our democratic process functions? It could be something like this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, international firms, and the billionaires behind them, can sue governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but funds the tribunal officials decide the company could potentially have made. The government might be compelled to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being brought, as firms observe each other, and hedge funds fund legal actions in return for a cut of the awards. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions taken by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – into international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had approved. Now, this victory could be compromised by an secret arbitration panel answering to exclusively the entities filing the suit.

In August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he will utilise the tribunal to fight the restrictions the UK enacted against him following the invasion of Ukraine. He has previously filed a claim against another European state with similar intent, claiming $16bn: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that these events could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter described critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to prevent global warming. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP