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How do you perceive our democratic process operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, and the wealthy individuals who own them, can sue nation states for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to corporations operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards constitute not real financial harm but compensation the panel members conclude the company might otherwise have made. The government could be forced to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms take cues from each other, and private equity bankroll lawsuits in return for a cut of the takings. The result? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings enacted by legislatures is that this clause has been incorporated – without public consent, and often in an atmosphere of profound opacity – into international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the high court. The judge ruled that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have no impact on climate commitments. The Labour government then withdrew the consent the previous administration had issued. Now, this success is under threat by an foreign court accountable to exclusively the corporations filing the suit.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. The public has no clear indication how much this might be. What legal team is representing it challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it seems likely that he will utilise the tribunal to contest the restrictions the UK enacted against him following the Russian aggression. He has started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of government’s annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that such things were not possible. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” A consultant on this issue accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with general mockery.

That prediction is now a reality. Recently, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP