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How do you understand our democratic process works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Advent of Secret Courts

Nowadays, foreign corporations, or the billionaires who own them, can sue governments for the policies they pass, at offshore tribunals composed of business advocates. The cases are held behind closed doors. Unlike our courts, these bodies grant no right of appeal or legal review. The general public cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but funds the tribunal officials conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It is hesitant to passing future laws of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being filed, as firms learn from each other, and private equity finance suits in return for a share of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the decisions made by elected bodies is that this stipulation has been written – absent public approval, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The justice ruled that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had approved. Now, this legal outcome faces being overturned by an foreign court accountable to exclusively the entities petitioning it.

Last August, a corporate entity whose ultimate owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. What legal team is representing it against the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The government enacts a policy, the high court supports it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK imposed on him after the war in Ukraine. He has already started suing Luxembourg for this reason, seeking a colossal sum: half that government’s yearly budget. Among the legal team acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Escalating Threats

Politicians promised that these events were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That threat has now materialised. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP