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What is your reckon our democratic process works? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Rise of Secret Tribunals

Nowadays, foreign corporations, along with the wealthy individuals behind them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these tribunals grant 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 only to corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but money the panel members determine the company would perhaps have made. The administration might be compelled to rescind the measure. It will be hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being brought, as firms take cues from each other, and hedge funds finance suits in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by legislatures is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice determined that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The new government then withdrew the consent the former government had granted. Now, this victory faces being overturned by an secret arbitration panel answering to no one but the corporations petitioning it.

In August, a firm whose ultimate owners reside in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

The company is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have little idea how much this sum represents. Which individual is acting on its behalf challenging the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to fight the penalties the UK imposed on him after the invasion of Ukraine. He has started suing a small nation on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that such things wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this topic accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Warnings that “when companies begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. This year, fossil fuel and resource corporations have initiated a record number of suits against nations rich and poor, contesting – similar to the UK mine – state efforts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP