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How do you reckon our democratic process works? Maybe similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Rise of Secret Courts

In the modern era, foreign corporations, and the billionaires who own them, can sue governments for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, even billions.

This compensation are based not on actual losses but money the tribunal officials decide the company could potentially have made. The state may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and investment funds bankroll lawsuits in return for a cut of the takings. The consequence? Sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by elected bodies is that this stipulation has been written – without public consent, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the high court. The judge determined that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Now, this success could be compromised by an foreign court reporting to only the entities bringing the case.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the US capital was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to proceed. The public has no clear indication how much this could amount to. Which individual is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a international entity contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it seems likely that he may employ the arbitration process to fight the sanctions the UK levied against him following the Russian aggression. He has filed a claim against another European state on these grounds, claiming a colossal sum: half that state's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Escalating Costs

We were assured that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An adviser on this issue labelled activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with general mockery.

That threat is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to prevent environmental catastrophe. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP