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How do you reckon our democratic process works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Secret Tribunals

Today, foreign corporations, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies based in this country. Access is granted exclusively to corporations registered abroad.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation represent not actual losses but funds the panel members conclude the company would perhaps have made. The state may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of cases are being brought, as firms learn from each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions taken by parliaments is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The judge found that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The new government later cancelled the permission the former government had granted. Now, this victory faces being overturned by an secret arbitration panel accountable to exclusively the companies bringing the case.

In August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was set up to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. Which individual is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the panel on the mining lawsuit was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it appears probable that he may employ the tribunal to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has previously filed a claim against another European state for this reason, claiming $16bn: half that government’s annual revenue. Part of the legal team on his side? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as security for its financial support package is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Risks

Politicians promised that these events could not occur. In 2014, a government leader, championing the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An expert on this topic described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That warning has now materialised. Recently, fossil fuel and extraction companies have initiated a historic level of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to halt global warming. Firms have to date won vast sums by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP