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How do you understand our democratic process works? Maybe along the lines of this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Emergence of Secret Tribunals

Nowadays, international firms, or the oligarchs who own them, have the power to sue governments for the laws they pass, at private courts made up of business advocates. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. You or I cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but funds the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It becomes hesitant to passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as companies observe each other, and hedge funds finance suits in exchange for a portion of the settlements. The result? National sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the decisions made by legislatures is that this clause has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – within trade treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice found that schemes to excavate the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The new government then withdrew the licence the previous administration had approved. Today, this legal outcome could be compromised by an foreign court accountable to only the entities petitioning it.

During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the United States was convened to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have little idea how much this could amount to. Who is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The state enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an secretive private court, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he may employ the arbitration process to contest the penalties the UK levied against him after the war in Ukraine. He has already started suing a small nation on these grounds, seeking $16bn: half that state's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that such things were not possible. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An adviser on this issue labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and resource corporations have filed a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP