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How do you understand our democratic process operates? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Emergence of Offshore Courts

Today, overseas companies, or the billionaires behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums represent not tangible damages but money the arbitrators determine the company might otherwise have made. The state could be forced to abandon its policy. It will be deterred from passing future laws along the same lines, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as companies learn from each other, and hedge funds finance suits for a share of a portion of the awards. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – inside trade treaties.

A Concrete Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government later cancelled the licence the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was convened to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Which individual is acting on its behalf in opposition to the state? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already started suing a small nation with similar intent, claiming sixteen billion dollars: half that nation's annual revenue. Part of the lawyers representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Risks

Politicians promised that such things were not possible. Previously, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, oil and gas and extraction companies have initiated a historic level of cases against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to halt global warming. Firms have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP