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How do you understand our democratic process works? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, along with the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to corporations operating from foreign soil.

If a tribunal finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards represent not actual losses but funds the arbitrators determine the company could potentially have made. The administration may have to drop the legislation. It becomes deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The consequence? National sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Currently, this legal outcome could be compromised by an foreign court answering to exclusively the corporations petitioning it.

During August, a company whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to proceed. The public has little idea how much this might be. Which individual is serving as its counsel against the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the high court supports it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming sixteen billion dollars: half that nation's yearly budget. Among the lawyers representing him there? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s delay in using frozen state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this matter accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That warning has come to pass. In the current period, oil and gas and mining firms have initiated a record number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – state efforts to halt environmental catastrophe. Firms have to date won $114bn by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP