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How do you understand our democratic process operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills become law. The law is maintained by the courts. End of story. Well, that was how it operated in the past. No longer.

The Rise of Secret Courts

Nowadays, overseas companies, along with the oligarchs who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases are conducted in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. The door is open only to corporations operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards represent not actual losses but funds the tribunal officials determine the company would perhaps have made. The state may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being brought, as companies take cues from each other, and hedge funds fund legal actions in exchange for a share of the awards. The consequence? Sovereignty and democracy are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings taken by legislatures is that this provision has been written – absent public approval, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Real-World Example: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that proposals to open the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have no consequence on climate commitments. The incoming administration later cancelled the consent the previous administration had approved. Now, this success is under threat by an foreign court answering to exclusively the companies filing the suit.

During August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was established to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Who is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court validates it, then a overseas corporation contests it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has already started suing Luxembourg for this reason, claiming sixteen billion dollars: half that government’s yearly income. Part of the counsel on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade deal after trade deal and there has not been a case in the past.” An expert on this issue accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and mining firms have lodged a record number of cases against nations rich and poor, contesting – as in the case of the UK mine – official measures to halt global warming. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP