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How do you understand our democratic process works? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Secret Tribunals

In the modern era, overseas companies, along with the oligarchs behind them, can sue governments for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. They are open solely for corporations operating from foreign soil.

If a tribunal rules that a government measure might diminish the corporation’s projected profits, it can award compensation of vast sums, running into billions.

These awards constitute not tangible damages but funds the arbitrators conclude the company could potentially have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as firms learn from each other, and hedge funds finance suits in exchange for a cut of the awards. The result? National sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the choices made by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid conditions of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the High Court. The judge ruled that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Today, this victory is under threat by an foreign court reporting to exclusively the companies filing the suit.

During August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a foreign company contests it through an secretive private court, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the court on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it seems likely that he may employ the tribunal to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that these events could not occur. Previously, a senior politician, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a issue in the past.” An adviser on this topic labelled critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That prediction has come to pass. This year, energy and extraction companies have initiated a historic level of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP