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Can you reckon our democratic process operates? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Well, that used to be how it used to work. No longer.

The Emergence of Secret Courts

In the modern era, overseas companies, and the billionaires behind them, are able to litigate against nation states for the regulations they pass, at private courts composed of corporate lawyers. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for entities registered abroad.

When a secret court finds that a government measure could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation constitute not real financial harm but funds the panel members decide the company might otherwise have made. The administration could be forced to drop the legislation. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies observe each other, and investment funds fund legal actions in return for a portion of the awards. The result? National sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings enacted by legislatures is that this clause has been inserted – without public consent, and typically amid conditions of total confidentiality – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The new government later cancelled the permission the previous administration had issued. Today, this success could be compromised by an offshore tribunal reporting to exclusively the companies filing the suit.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no idea how much this might be. What legal team is serving as its counsel challenging the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a foreign company contests it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him following the war in Ukraine. He has initiated proceedings against another European state for this reason, claiming $16bn: equivalent to half of government’s yearly income. Part of the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” A consultant on this issue described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That threat has now materialised. This year, energy and extraction companies have initiated a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP