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How do you perceive our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the regulations they pass, at private courts made up of business advocates. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but money the tribunal officials determine the company would perhaps have made. The administration might be compelled to drop the legislation. It will be hesitant to enacting future policies along the same lines, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as companies take cues from each other, and private equity fund legal actions for a share of a share of the settlements. The consequence? Sovereignty and democracy are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings enacted by parliaments is that this provision has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – within trade treaties.

A Concrete Instance: The UK Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the licence the Tories had issued. Now, this victory is under threat by an secret arbitration panel accountable to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers are based in the offshore financial centre lodged a claim against the UK government. Last week a tribunal in the United States was established to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. We have no idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an undemocratic private court, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK imposed on him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, demanding a colossal sum: an amount representing half state's annual revenue. Among the legal team representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Costs

The public was told that these events were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An expert on this issue labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “when companies start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That prediction has now materialised. Recently, energy and mining firms have initiated a historic level of suits against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to prevent global warming. Corporations have to date won $114bn through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP