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Can you perceive our democratic process works? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it used to work. Those days are over.

The Emergence of Secret Courts

Today, international firms, or the billionaires behind them, have the power to sue governments for the policies they pass, at private courts made up of commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these bodies provide no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses based in this country. They are open only to entities based overseas.

Should an arbitration panel rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards represent not real financial harm but funds the tribunal officials conclude the company could potentially have made. The state may have to rescind the measure. It will be deterred from passing future laws along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being initiated, as companies take cues from each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions enacted by legislatures is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of extreme secrecy – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the high court. The justice determined that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The Labour government then withdrew the licence the previous administration had issued. Today, this victory is under threat by an offshore tribunal reporting to no one but the companies petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Which individual is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary supports it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the sanctions the UK imposed on him after the war in Ukraine. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: an amount representing half state's annual revenue. Among the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Costs

The public was told that these scenarios were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms grasp the power they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with general mockery.

That threat is now a reality. In the current period, energy and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, opposing – similar to the UK mine – state efforts to stop climate breakdown. Firms have so far won $114bn by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP