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How do you reckon our democratic process operates? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Advent of Secret Courts

Today, foreign corporations, and the oligarchs behind them, can sue governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to corporations operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

This compensation represent not actual losses but money the tribunal officials decide the company might otherwise have made. The government may have to drop the legislation. It becomes discouraged from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The result? Sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The new government then withdrew the permission the previous administration had approved. Currently, this success is under threat by an offshore tribunal answering to no one but the companies bringing the case.

Last August, a firm whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. What legal team is serving as its counsel in opposition to the state? 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 validates it, then a international entity contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the tribunal to contest the restrictions the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that such things were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this issue labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That warning has now materialised. This year, energy and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – official measures to halt global warming. Firms have so 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