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Can you reckon our democratic process operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. That's it. However, that was how it used to work. No longer.

The Advent of Secret Tribunals

Nowadays, overseas companies, along with the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. They are open only to entities operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but money the arbitrators conclude the company could potentially have made. The administration might be compelled to rescind the measure. It is discouraged from enacting future policies in that area, for fear of being sued.

A System Running Rampant

Record numbers of legal actions are being initiated, as companies observe each other, and private equity bankroll lawsuits in return for a share of the awards. The result? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices made by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The justice determined that proposals to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the Tories had granted. Today, this success could be compromised by an offshore tribunal reporting to only the companies filing the suit.

In August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

The claimant is seeking compensation from 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 sum represents. Who is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it is highly possible that he may employ the arbitration process to contest the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against a small nation on these grounds, claiming $16bn: equivalent to half of nation's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms start to realise the authority they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by widespread derision.

That threat is now a reality. Recently, energy and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to prevent global warming. Corporations have to date won vast sums via ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP