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Can you reckon our democratic process operates? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Advent of Secret Courts

Today, overseas companies, and the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted in secret. Unlike our courts, these panels provide no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open only to corporations registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions enacted by legislatures is that this provision has been written – without democratic mandate, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The UK Coalmine

Last year, environmental campaigners won a great victory at the High Court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had approved. Currently, this legal outcome could be compromised by an foreign court accountable to no one but the companies petitioning it.

During August, a company whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Who is representing it challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a international entity challenges it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing another European state with similar intent, claiming $16bn: an amount representing half nation's yearly income. Included in the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Threats

Politicians promised that such things could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has come to pass. In the current period, fossil fuel and mining firms have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP