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Can you reckon our democratic process functions? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Rise of Secret Tribunals

Today, international firms, and the oligarchs that control them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open exclusively to businesses based overseas.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company might otherwise have made. The government may have to drop the legislation. It becomes deterred from passing future laws in that area, worried about being sued.

A System Growing Exponentially

Historically high figures of cases are being brought, as firms learn from each other, and private equity finance suits for a share of a portion of the takings. The outcome? Sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions enacted by legislatures is that this clause has been written – without public consent, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Real-World Example: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the permission the Tories had issued. Now, this success faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Recently a arbitration panel in the United States was convened to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is acting on its behalf against the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it appears probable that he will utilise the arbitration process to contest the penalties the UK levied against him following the war in Ukraine. He has filed a claim against Luxembourg for this reason, seeking $16bn: an amount representing half nation's annual revenue. Among the lawyers on his side? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that these events were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning is now a reality. This year, oil and gas and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to prevent global warming. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP