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How do you understand our democratic process operates? It could be similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that’s how it once functioned. Not anymore.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, and the wealthy individuals who own them, can sue governments for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. Access is granted exclusively to entities based overseas.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums constitute not actual losses but money the panel members decide the company could potentially have made. The government might be compelled to rescind the measure. It will be deterred from enacting future policies along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and hedge funds finance suits for a share of a portion of the settlements. The outcome? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices taken by legislatures is that this provision has been incorporated – absent public approval, and frequently under conditions of total confidentiality – into international trade agreements.

A Concrete Example: The UK Coal Mine

A year ago, a conservation group won a great victory at the High Court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the consent the previous administration had granted. Currently, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Which individual is representing it against the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a international entity disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case so far, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has already filed a claim against another European state on these grounds, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this matter accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies grasp the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That threat has come to pass. Recently, energy and mining firms have filed a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to stop global warming. Corporations have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP