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Can you perceive our democratic process operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Rise of Secret Tribunals

Today, international firms, and the oligarchs who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open only to businesses registered abroad.

Should an arbitration panel finds that a government measure may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These sums represent not actual losses but funds the panel members determine the company would perhaps have made. The administration may have to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of legal actions are being brought, as firms take cues from each other, and investment funds finance suits for a share of a portion of the awards. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices taken by parliaments is that this stipulation has been inserted – absent public approval, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Real-World Example: The UK Coalmine

Last year, a conservation group won a great victory at the High Court. The justice found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an foreign court answering to only the companies filing the suit.

Last August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Who is representing it against the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an secretive private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coalmine case was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against another European state for this reason, claiming a colossal sum: an amount representing half state's yearly income. Among the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these events could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” An adviser on this matter described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction is now a reality. In the current period, oil and gas and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have to date won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP