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How do you perceive our democratic process functions? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Secret Courts

Today, overseas companies, or the billionaires that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for corporations registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it can award compensation of vast sums, running into billions.

This compensation constitute not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The administration may have to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as corporations learn from each other, and private equity bankroll lawsuits in return for a share of the awards. The outcome? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices taken by legislatures is that this clause has been incorporated – without public consent, and typically amid a climate of profound opacity – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The judge determined that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The new government subsequently revoked the licence the Tories had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel answering to exclusively the corporations petitioning it.

In August, a company whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. We have little idea how much this could amount to. Who is representing it against the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company disputes it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK levied against him following the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, claiming a colossal sum: half that government’s yearly income. Part of the counsel representing him there? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that these events could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this issue labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations start to realise the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction has now materialised. This year, oil and gas and extraction companies have lodged a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP