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Can you understand our democratic process functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Rise of Secret Courts

In the modern era, international firms, and the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies operating from this country. The door is open only to businesses based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These awards are based not on actual losses but funds the panel members decide the company might otherwise have made. The administration may have to abandon its policy. It becomes deterred from passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in return for a cut of the takings. The outcome? National sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under conditions of total confidentiality – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the high court. The judge found that schemes to open the first new deep coal mine in the UK for a generation, 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 zero effect on our carbon budgets. The Labour government later cancelled the licence the former government had granted. Now, this success faces being overturned by an foreign court accountable to only the corporations bringing the case.

Last August, a company whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the US capital was convened to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no idea how much this might be. Which individual is acting on its behalf against the British government? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The administration enacts a policy, the domestic court validates it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, demanding $16bn: half that state's yearly budget. Among the legal team on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That threat has come to pass. In the current period, energy and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to halt climate breakdown. Companies have so far won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP