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How do you understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that was how it once functioned. No longer.

The Emergence of Secret Tribunals

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to businesses based overseas.

If a tribunal finds that a government measure could harm the corporation’s anticipated profits, it can award compensation of vast sums, even billions.

This compensation are based not on actual losses but money the tribunal officials decide the company could potentially have made. The administration could be forced to rescind the measure. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms observe each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions enacted by legislatures is that this clause has been written – absent public approval, and often in a climate of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the permission the Tories had approved. Today, this victory could be compromised by an offshore tribunal answering to only the companies bringing the case.

Last August, a firm whose final controllers reside in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. We have no idea how much this might be. Which individual is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK levied against him following the war in Ukraine. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half government’s yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all investment pacts, told us: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That warning is now a reality. Recently, energy and extraction companies have initiated a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have so far won vast sums by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP