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What is your understand our democratic process works? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

In the modern era, overseas companies, along with the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted solely for businesses based overseas.

When a secret court finds that a legislative action could harm the corporation’s expected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation are based not on tangible damages but money the tribunal officials determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being initiated, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The result? National sovereignty and democratic governance are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Case: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice ruled that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration later cancelled the consent the previous administration had approved. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the entities filing the suit.

During August, a firm whose ultimate owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the United States was set up to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration makes a decision, the high court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him after the Russian aggression. He has previously started suing another European state on these grounds, seeking a colossal sum: half that state's yearly budget. Included in the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that these events could not occur. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. Recently, energy and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP