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How do you understand our democratic process operates? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation represent not tangible damages but funds the panel members determine the company could potentially have made. The government might be compelled to abandon its policy. It is discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as corporations take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The outcome? National sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – inside trade treaties.

A Specific Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The judge found that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the consent the former government had approved. Currently, this success faces being overturned by an foreign court answering to exclusively the companies bringing the case.

In August, a corporate entity whose beneficial owners are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Which individual is acting on its behalf against the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the war in Ukraine. He has started suing another European state for this reason, seeking sixteen billion dollars: an amount representing half state's yearly budget. Part of the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

Politicians promised that such things were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An expert on this topic described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – government attempts to halt global warming. Companies have so far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP