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How do you reckon our democratic process works? It could be something like this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Secret Courts

Nowadays, international firms, and the oligarchs that control them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by business advocates. The cases take place behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. They are open solely for businesses based overseas.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but funds the tribunal officials determine the company could potentially have made. The state might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of cases are being initiated, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The outcome? National sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices taken by elected bodies is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Case: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government then withdrew the consent the previous administration had issued. Now, this success could be compromised by an secret arbitration panel answering to only the entities filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim against the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is suing the UK for the money it could have earned if the mine had received permission to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf against the state? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the high court supports it, then a international entity contests it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: half that government’s yearly budget. Included in the counsel representing him there? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that such things could not occur. Previously, a government leader, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” An adviser on this topic accused activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP